A Simpler Approach to Financial Reform
6 Pages Posted: 28 Aug 2013 Last revised: 26 Feb 2014
Date Written: August 1, 2013
There is a growing consensus that new financial reform legislation may be in order. The Dodd-Frank Act of 2010, while well-intended, is now widely viewed to be at best insufficient, at worst a costly misfire. Members of Congress are considering new and different measures. Some have proposed substantially higher capital requirements for the largest financial firms; others favor an updated version of the old Glass-Steagall regime. This paper offers up a simpler approach, one that centers around the financial sector’s short-term funding. The simpler approach would be compatible with other financial stability reforms, but it is better understood as a substitute for Dodd-Frank and other measures.
Keywords: financial stability, financial reform, Dodd-Frank, short-term funding, wholesale funding, banking panic, shadow banking
JEL Classification: E42, K23
Suggested Citation: Suggested Citation