Restoring Financial Stability: How to Repair a Failed System -- Contents -- Foreword -- Acknowledgments -- Prologue: A Bird's-Eye View -- P.1 THE FINANCIAL CRISIS OF 2007-2009 -- P.2 REQUIEM FOR THE SHADOW BANKING SECTOR -- P.3 CAUSES -- P.4 EFFICIENT REGULATION: PRINCIPLES AND PROPOSALS -- P.5 DESCRIPTION OF PUBLIC INTERVENTIONS TO STABILIZE THE FINANCIAL SYSTEM AND ASSESSMENT OF THEIR EFFICACY -- P.6 THE NEED FOR INTERNATIONAL COORDINATION -- APPENDIX: TIME LINE OF CRISIS -- NOTES -- Part One: Causes of the Financial Crisis of 2007-2009 -- Chapter 1: Mortgage Origination and Securitization in the Financial Crisis -- 1.1 INTRODUCTION: THE U.S. MORTGAGE MARKET -- 1.2 SOME SALIENT FACTS -- 1.3 WHAT WENT WRONG? -- 1.4 PRINCIPLES -- 1.5 PROPOSALS -- 1.6 CONCLUSION -- NOTES -- REFERENCES -- Chapter 2: How Banks Played the Leverage Game -- 2.1 CREDIT RISK TRANSFER AND BANK LEVERAGE -- 2.2 ASSET-BACKED COMMERCIAL PAPER CONDUITS -- 2.3 BANK BALANCE SHEETS AND RISK-WEIGHTED ASSETS -- 2.4 WAYS TO COUNTER REGULATORY ARBITRAGE AND AGGREGATE RISK SHIFTING -- NOTES -- REFERENCES -- Chapter 3: The Rating Agencies: Is Regulation the Answer? -- 3.1 BACKGROUND -- 3.2 WHAT IS THE PROBLEM? -- 3.3 PRINCIPLES AND REGULATION PROPOSALS -- 3.4 CONCLUSION -- NOTES -- REFERENCES -- Part Two: Financial Institutions -- Chapter 4: What to Do about the Government-Sponsored Enterprises? -- 4.1 BACKGROUND -- 4.2 SECURITIZATION -- 4.3 THE GSEs' MORTGAGE INVESTMENT STRATEGY -- 4.4 THE FINANCIAL CRISIS OF 2007-2009 -- 4.5 ON REGULATORY REFORM OF THE GSEs -- 4.6 SPECIFIC PROPOSALS -- NOTES -- REFERENCES -- Chapter 5: Enhanced Regulation of Large, Complex Financial Institutions -- 5.1 WHAT ARE LARGE, COMPLEX FINANCIAL INSTITUTIONS? -- 5.2 WHERE DID THEY COME FROM? -- 5.3 THE BIG BALANCE SHEET BUSINESS MODEL -- 5.4 IS THERE VALUE IN LCFIs? -- 5.5 BROADENING OF LCFI BAILOUT GUARANTEES.

5.6 THE REGULATORY CHALLENGE -- 5.7 GLOBAL DIMENSIONS -- NOTES -- REFERENCES -- Chapter 6: Hedge Funds in the Aftermath of the Financial Crisis -- 6.1 WHAT ARE HEDGE FUNDS? -- 6.2 HOW DO HEDGE FUNDS ADD VALUE? -- 6.3 PROBLEMS ASSOCIATED WITH HEDGE FUNDS -- 6.4 PRINCIPLES -- 6.5 REGULATION OF HEDGE FUNDS IN THE AFTERMATH OF THE CRISIS -- 6.6 CONCLUSION -- NOTES -- REFERENCES -- Part Three: Governance, Incentives, and Fair Value Accounting Overview -- Chapter 7: Corporate Governance in the Modern Financial Sector -- 7.1 INTRODUCTION -- 7.2 CORPORATE GOVERNANCE AT LCFIs -- 7.3 DID GOVERNANCE FAIL? -- 7.4 COMPENSATION AT FINANCIAL FIRMS -- NOTES -- REFERENCES -- Chapter 8: Rethinking Compensation in Financial Firms -- 8.1 INTRODUCTION -- 8.2 EXAMPLES OF MISALIGNED APPROACHES TO COMPENSATION -- 8.3 SENIOR MANAGEMENT COMPENSATION -- 8.4 COMPENSATING HIGH-PERFORMANCE EMPLOYEES IN BANKING AND FINANCE -- 8.5 HOW DOES THE FINANCIAL SERVICES SECTOR COMPARE TO OTHERS? -- 8.6 SEEKING CHANGE -- NOTES -- REFERENCES -- Chapter 9: Fair Value Accounting: Policy Issues Raised by the Credit Crunch -- 9.1 INTRODUCTION -- 9.2 OVERVIEW OF FAIR VALUE ACCOUNTING VERSUS THE ALTERNATIVES ABSTRACTING FROM THE CREDIT CRUNCH -- 9.3 FAS 157's MEASUREMENT GUIDANCE -- 9.4 POTENTIAL CRITICISMS OF FAIR VALUE ACCOUNTING DURING THE CREDIT CRUNCH -- NOTES -- REFERENCES -- Part Four: Derivatives, Short Selling, and Transparency -- Chapter 10: Derivatives: The Ultimate Financial Innovation -- 10.1 GENERAL BACKGROUND AND COST-BENEFIT ANALYSIS OF DERIVATIVES -- 10.2 THE CREDIT DERIVATIVES MARKET AND THE FINANCIAL CRISIS -- 10.3 PRINCIPLES OF REGULATING DERIVATIVES -- 10.4 REGULATION OF DERIVATIVES-SOME SUGGESTIONS -- NOTES -- REFERENCES -- Chapter 11: Centralized Clearing for Credit Derivatives -- 11.1 OTC CREDIT DERIVATIVES-A SNAPSHOT.

11.2 WEAKNESSES IN THE CDS TRADING INFRASTRUCTURE: SOME EXAMPLES -- 11.3 THE BENEFITS OF CENTRALIZED CLEARING -- 11.4 POSSIBLE SOLUTIONS AND THEIR RELATIVE MERITS -- 11.5 DESIRABLE LEVELS OF TRANSPARENCY -- 11.6 RECENT PROPOSALS AND WILL THEY SUCCEED? -- 11.7 IMPLICATIONS FOR OTHER MARKETS -- NOTES -- REFERENCE -- Chapter 12: Short Selling -- 12.1 BACKGROUND -- 12.2 THE ISSUES -- 12.3 FINANCIAL MARKETS: FAIRNESS AND EFFICIENCY -- 12.4 WHO BENEFITS FROM SHORT SALES? -- 12.5 MARKET MANIPULATION AND REGULATORY RESPONSE -- 12.6 TRANSPARENCY AND REPORTING -- 12.7 CONCLUSION -- NOTES -- REFERENCES -- Part Five: The Role of the Federal Reserve -- Chapter 13: Regulating Systemic Risk -- 13.1 INTRODUCTION -- 13.2 WHY SYSTEMIC FINANCIAL RISK MUST BE REGULATED -- 13.3 MEASURING A FIRM'S CONTRIBUTION TO SYSTEMIC RISK -- 13.4 REGULATING SYSTEMIC RISK -- APPENDIX: EXAMPLES OF SYSTEMIC RISK IN THE CURRENT CRISIS -- NOTES -- REFERENCES -- Chapter 14: Private Lessons for Public Banking: The Case for Conditionality in LOLR Facilities -- 14.1 INTRODUCTION -- 14.2 BAGEHOT RECONSIDERED -- 14.3 PRIVATE LINES OF CREDIT -- 14.4 CENTRAL BANK LENDING FACILITIES -- 14.5 CONCLUSIONS -- NOTES -- REFERENCES -- Part Six: The Bailout -- Chapter 15: The Financial Sector Bailout: Sowing the Seeds of the Next Crisis? -- 15.1 THE RESCUE PACKAGE -- 15.2 THE IMPLICATIONS: QUESTIONS OF INTEREST -- 15.3 THE CAPITAL INJECTION SCHEME -- 15.4 THE COMMERCIAL PAPER FUNDING FACILITY -- 15.5 POLICY RECOMMENDATIONS -- NOTES -- Chapter 16: Mortgages and Households -- 16.1 BACKGROUND -- 16.2 INCOMPLETE CONTRACTS AND DEBT-FOR-EQUITY SWAPS -- 16.3 AN ACTION PLAN -- 16.4 COMPARISON WITH ALTERNATIVE POLICIES -- NOTES -- REFERENCE -- Chapter 17: Where Should the Bailout Stop? -- 17.1 BACKGROUND -- 17.2 ON THE PROPER USE OF CHAPTER 11 -- 17.3 DEBTOR-IN-POSSESSION FINANCING.

17.4 OUR PROPOSED SOLUTION FOR AUTOMAKERS -- 17.5 CONCLUSION -- NOTES -- Part Seven: International Coordination -- Chapter 18: International Alignment of Financial Sector Regulation -- 18.1 THE CASE FOR INTERNATIONAL COORDINATION -- 18.2 ADDRESSING REGULATORY EXTERNALITY -- 18.3 HISTORY OF INTERNATIONAL COORDINATION EFFORTS -- 18.4 RECOMMENDED STEPS TO ACHIEVE INTERNATIONAL COORDINATION -- NOTES -- REFERENCES -- About the Authors -- Index.