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After the 2007–09 financial crisis, Congress created the Financial Stability Oversight Council (FSOC) to try to address systemic risk and financial instability. During an AEI conference on Tuesday, experts agreed that a committee like the FSOC is not capable of creating financial stability. Congressman Scott Garrett (R-NJ) kicked off the discussion by pointing out that the FSOC is opaque and overly political. Michael Piwowar of the Securities and Exchange Commission then stressed the structural and procedural weaknesses of the FSOC, including not using the expertise of the nonbank regulators, which are better suited to addressing capital markets issues.
The first panel discussed systemic risk. Charles Calomiris of AEI and of Columbia University proposed that financial regulation has failed, at least in part, because of bad incentives facing regulators. Other panelists, including Gerard Caprio of Williams College and Allan Mendelowitz of Deloitte, proposed creating a truly independent body whose job is to supply information, analysis, and recommendations about systemic risks, but without any regulatory authority.
In the second panel, John Davidson of Citigroup recommended that the government regulate by financial activities rather than entities. AEI's Paul Kupiec declared that financial intermediation and economic growth are tightly linked, but that the FSOC and the Dodd-Frank Act focus only on downside risk, not upside growth. AEI's Peter Wallison argued that the whole idea of systemically important financial institutions is a conceptual and policy mistake, and used the failure of Lehman Brothers to show the lack of "interconnectivity."
The notorious Dodd-Frank Act set up the Financial Stability Oversight Council (FSOC), a committee of regulators, and tasked it with identifying and preventing the ill-defined threat of systemic risk. The FSOC has the unprecedented power to expand its own jurisdiction, free of checks and balances, by designating systemically important financial institutions (SIFIs), and to meet in secret. The Financial Stability Board, an analogous committee that interacts with the FSOC, was established in Europe.
Our keynote speakers and expert panelists will address the fundamental problems created by these political constructs, explore the notions of systemic risk and SIFIs, and consider what alternative measures might be more effective and more consistent with the rule of law.
If you are unable to attend, we welcome you to watch the event live on this page. Full video will be posted within 24 hours.
Registration and lunch
Scott Garrett, Chairman of the House Subcommittee on Capital Markets and GSEs (R-NJ)
Michael Piwowar, Commissioner of the Securities and Exchange Commission
Panel I: Systemic risk
Charles W. Calomiris, Columbia University and AEI
Gerard Caprio Jr., Williams College
Asli Demirgüç-Kunt, World Bank Group
Allan Mendelowitz, Deloitte
Alex J. Pollock, AEI
Panel II: Improving the Financial Stability Oversight Council
John P. Davidson, Citigroup
Paul H. Kupiec, AEI
Ernest Patrikis, White & Case LLP
Peter J. Wallison, AEI
Charles W. Calomiris, Columbia University and AEI
For more information, please contact Brian Marein at [email protected], 202.862.5890.
For media inquiries, please contact [email protected], 202.862.5829.
Charles W. Calomiris is the Henry Kaufman Professor of Financial Institutions at Columbia Business School and a research associate at the National Bureau of Economic Research. His research spans several areas, from banking and corporate finance to financial history and monetary economics. Calomiris also served on the 2000 congressionally mandated International Financial Institution Advisory Commission and served from 2011 to 2013 on the advisory scientific committee of the European Systemic Risk Board. He spent the last year as a visiting researcher at the International Monetary Fund.
Gerard Caprio Jr. is the William Brough Professor of Economics at Williams College and chair of the Center for Development Economics at Williams. Previously, he was the director for policy in the World Bank’s financial sector vice presidency and head of the financial sector research group. His research included establishing the first databases on banking crises around the world and on bank regulation and supervision, and he worked on financial system reform and development issues around the world. Caprio has authored numerous articles and coauthored both “The Guardians of Finance: Making Regulators Work for Us” (MIT Press, 2012) and “Rethinking Bank Regulation: Till Angels Govern” (Cambridge University Press, 2006) with Jim Barth and Ross Levine. He is a coeditor of the Journal of Financial Stability and served as editor in chief of a three-volume handbook series on financial globalization for Elsevier. Earlier positions include vice president and head of global economics at JP Morgan and economist positions at the Federal Reserve Board and the International Monetary Fund. He has taught at Trinity College Dublin, where he was a Fulbright Scholar, and at George Washington University.
John P. Davidson is the chief compliance officer of Citigroup, where he leads global compliance. Before becoming chief compliance officer, Davidson was head of enterprise risk management (ERM). Before his ERM assignment, Davidson was the risk chief administrative officer and responsible for infrastructure risk management. From February 2006 to April 2008, Davidson was managing director and chief corporate development officer of the CME Group. He was responsible for oversight of research and product development, strategic planning, business development, and corporate project management. He has more than 30 years of experience in the global financial services industry. Before joining CME in 2006, he had a 12-year career with Morgan Stanley, most recently as managing director and operations officer for the firm's global operations and services division. Before joining Morgan Stanley, Davidson worked for 10 years as head of the CME Clearing House. Davidson serves on the board of directors of CLS Bank International and as an adviser to the risk committee of Euroclear SA/NV. In addition, he is a member of the risk committee of the CME Group. Davidson is a former board member of the Options Clearing Corporation and was a member of the operations advisory committee of the New York Stock Exchange and the operations advisory committee of the Depository Trust & Clearing Corporation.
Asli Demirgüç-Kunt is the director of research at the World Bank. After joining the Bank in 1989 as a young economist, she held different positions, including director of development policy, chief economist of financial and private-sector development network, and senior research manager, doing research and advising on financial- and private-sector development issues. She is the lead author of World Bank Policy Research Report 2007, “Finance for all? Policies and pitfalls in expanding access.” She has also created the World Bank’s Global Financial Development Report and directed the issues on rethinking the role of the state in finance (2013) and financial inclusion (2014). The author of more than 100 publications, Demirgüç-Kunt has published widely in academic journals. Her research has focused on the links between financial development, firm performance, and economic development; banking crises; financial regulation; and access to financial services, including SME finance. Before coming to the Bank, she was an economist at the Federal Reserve Bank of Cleveland.
Scott Garrett is the US representative for New Jersey's Fifth Congressional District, serving since 2003. As chairman of the Subcommittee on Capital Markets and Government Sponsored Enterprises, Rep. Garrett has jurisdiction over equity, fixed-income and derivatives markets, investment advisers and broker-dealers, the secondary mortgage market the accounting and auditing profession, and the investment fund industry. His legislative achievements include easing the burden placed on small business by the Sarbanes-Oxley Act and lessening reliance on credit rating agencies. Rep. Garrett has authored the Protecting American Taxpayers and Homeowners Act, the Swap Jurisdiction Certainty Act, and a series of bills to increase accountability and transparency at the Federal Reserve, Financial Stability Oversight Council, and the US Securities and Exchange Commission. He has served on the Subcommittees on Financial Institutions and Consumer Credit, Housing and Community Opportunity, and Oversight and Investigations. Before his election to Congress, Garrett served in the New Jersey General Assembly as chairman of the Banking and Insurance Committee. Garrett is a frequent guest on national television shows to discuss financial services issues, including appearances on CNBC, Fox News, Fox Business, CNN, and MSNBC. His op-eds have appeared in The Wall Street Journal and the Financial Times and he is regularly quoted in national business publications on issues related to financial services policy.
Paul H. Kupiec is a resident scholar at AEI, where he studies the management and regulation of banks and financial institutions markets, including issues of systemic risk and the impact of financial regulations on the US economy. Before joining AEI, Kupiec was director of the Center for Financial Research at the Federal Deposit Insurance Corporation (FDIC), and served as chairman of the Research Task Force of the Basel Committee on Banking Supervision. Before joining the FDIC, he held positions at the International Monetary Fund, Freddie Mac, J.P. Morgan, and the Board of Governors of the Federal Reserve System. Kupiec has served on the editorial boards of the Journal of Financial Services Research, Journal of Risk, and Journal of Investment Management. He is a member of the Shadow Financial Regulatory Committee.
Allan Mendelowitz is a strategic adviser to Deloitte Consulting LLC. He is a former chairman and member of the board of directors of the Federal Housing Finance Board, where he served two terms. Following the financial crisis of 2008, he cofounded and co-led the Committee to Establish the National Institute of Finance, which succeeded in creating the Office of Financial Research as part of the Dodd-Frank Act. His diverse experience in Washington includes serving as executive director of the US Trade Deficit Review Commission, executive vice president of the Export-Import Bank of the United States, and managing director at the US General Accounting Office (GAO). Before joining the GAO, he was an economic policy fellow at the Brookings Institution and on the faculty of the Department of Economics of Rutgers University. Mendelowitz has lectured widely on finance and economic issues and has appeared as a witness before committees of Congress more than 145 times. Articles by Mendelowitz have appeared in the Journal of Business, National Tax Journal, Journal of Policy Analysis and Management, Financial Times, American Banker, Waters: Financial Technology Intelligence, and various conference proceedings volumes.
Ernest Patrikis is a partner in the New York office of the bank and insurance regulatory practice of White & Case LLP. He has extensive experience in the banking and insurance industries, having served in senior positions for 30 years at the Federal Reserve Bank of New York and eight years at AIG. During his 30-year career at the Reserve Bank, Patrikis served as general counsel and later acted as chief operating officer in his role as first vice president. He also served as deputy general counsel and an alternate member of the Federal Open Market Committee; a staff member of the President’s Working Group on Financial Markets, which was created in the aftermath of the 1987 financial markets crisis; a member of the Committee on Payments and Settlement Systems of the G-10 central bank governors; legal adviser to the Basel Committee on Banking Supervision; and one of the principal drafters of the International Banking Act of 1978. He is also a member of the Council on Foreign Relations. Patrikis recently became president of the Center on Transnational Legal Studies.
Michael Piwowar was sworn in as commissioner of the US Securities and Exchange Commission in August 2013. Most recently, he was the Republican chief economist for the US Senate Committee on Banking, Housing, and Urban Affairs under Senators Mike Crapo (R-ID) and Richard Shelby (R-AL). He was the lead Republican economist on the four SEC-related titles of the Dodd-Frank Act and the Jumpstart Our Business Startups Act. During the financial crisis and its immediate aftermath, he served in a one-year fixed-term position at the White House as a senior economist on the president’s Council of Economic Advisers in both the George W. Bush and Barack Obama administrations.
Alex J. Pollock joined AEI in 2004 after 35 years in banking. He was formerly president and CEO of the Federal Home Loan Bank of Chicago from 1991 to 2004. He is also the author of numerous articles on financial systems and the organizer of the Living in the Post-Bubble World series of AEI conferences. In 2007, he developed a one-page mortgage form to help borrowers understand their mortgage obligations. At AEI, he focuses on financial policy issues, including housing finance, government-sponsored enterprises, retirement finance, corporate governance, accounting standards, and the banking system. He is the lead director of CME Group, a director of Great Lakes Higher Education Corporation and the International Union for Housing Finance, and chairman of the board of the Great Books Foundation.
Peter J. Wallison holds the Arthur F. Burns Chair in Financial Policy Studies at AEI, where he codirects the program on financial market studies. He was also a cochair of the Pew Financial Reform Task Force and a member of the congressionally authorized Financial Crisis Inquiry Commission. Wallison previously practiced banking, corporate, and financial law at Gibson, Dunn & Crutcher LLP in New York and Washington, DC. In 1986 and 1987, Wallison was White House counsel to former president Ronald Reagan. From 1981 to 1985, he was general counsel of the US Department of the Treasury, where he played a significant role in the development of the Reagan administration's proposals for deregulation in the financial services industry. He also served as general counsel to the Depository Institutions Deregulation Committee and participated in the US Department of the Treasury’s efforts to deal with the debt held by less-developed countries. Between 1972 and 1976, Wallison was special assistant to former New York governor Nelson A. Rockefeller and, subsequently, counsel to Rockefeller when he was vice president of the US.