Contents -- Preface -- Acknowledgments -- I. Special Addresses -- The International Financial Crisis: Asset Price Exuberance and Macroprudential Regulation Charles L. Evans, Federal Reserve Bank of Chicago -- References -- Back from the Brink Christina D. Romer, Council of Economic Advisers -- 1. The Initial Shocks -- 2. The Policy Response -- 3. Other Stabilizing Forces -- 4. The Outlook for Recovery -- 5. The Challenges Ahead -- 6. Conclusion -- References -- Getting the New Regulatory Framework Just Right: Six Questions for Policymakers José Viñals, International Monetary Fund -- 1. Microprudential Regulatory Reforms -- 2. Macroprudential Regulatory Reforms -- 3. Getting Things Just Right -- References -- Longer Days, Fewer Weekends Kevin M. Warsh, Board of Governors of the Federal Reserve System -- 1. The Task Ahead -- 2. Preliminary, Provisional, Subject-to-Revision, Condition-Dependent Forecast -- 2.1 First, when will the Fed's extraordinary policy accommodation demand removal? -- 2.2 Second, how might the policy response evolve? -- 2.3 Third, how might U.S. monetary policy be affected by other macroeconomic policies? -- References -- Banking Regulation: Changing the Rules of the Game Philipp M. Hildebrand, Swiss National Bank -- 1. Introduction -- 2. An Ounce of Prevention -- 2.1 Strengthening capital requirements -- 2.2 More robust liquidity requirements -- 3. Facilitating the Orderly Resolution of Banking Problems -- 4. Concluding Remarks -- References -- II. What Broke? The Root Causes of the Crisis -- The Causes of the Financial Crisis and the Impact of Raising Capital Requirements Martin Neil Baily and Douglas J. Elliott, Brookings Institution -- 1. Introduction -- 2. The Causes of the Crisis -- 2.1 Home prices were expected to keep rising -- 2.2 Long and short interest rates were low.

2.3 Housing demand built on itself to create a bubble in prices -- 2.4 Shifting types of lending and the erosion of standards -- 2.5 Economic incentives in the housing and mortgage origination markets -- 2.6 Securitization and the funding of the housing boom -- 2.7 More securitization and more leverage - CDOs -- 2.8 Structured investment vehicles and off-balance-sheet entities -- 2.9 Leverage and the push to short-term borrowing -- 2.10 Credit insurance and the growth in credit default swaps -- 2.11 The failure of company risk management practices -- 2.12 Regulation and supervision -- 3. What Is the Impact of Increasing Capital Requirements? -- 4. Conclusions -- References -- Origins of the Subprime Crisis Charles W. Calomiris, Columbia Business School and National Bureau of Economic Research -- 1. Introduction -- 2. Government Policy and the Origins of the Subprime Crisis -- 2.1 Monetary policy and global imbalances -- 2.2 Subsidization of mortgage risk -- 2.3 Prudential regulatory failure -- 2.3.1 Subprime ratings inflation and the regulatory reliance on ratings -- 2.3.2 Too big to fail -- 2.4 Corporate governance problems in large banks -- 2.5 The size of the shock vs. the size of the crisis -- 3. Conclusion -- References -- The Role of the Financial Sector in the Great Recession Michael Mussa, Peterson Institute for International Economics -- 1. A Classic Boom/Bust Cycle -- 2. The Financial Sector in the Global Recovery -- 3. Availability of Adequate Financing -- 4. The Long-Term Need for Deep Financial-Sector Reform -- 5. The Inherent Instability of Banking -- 6. Financial Repression, Financial Liberalization, and Moral Hazard -- 7. The Investor of Last Resort -- 8. The Fundamental Need for More Capital -- 9. An Adequate Level of Bank Capital -- References.

What Broke? The Root Causes of the Crisis Edwin M. Truman, Peterson Institute for International Economics -- III. Containing a Systemic Crisis: Is There Really No Playbook? -- Regulating Systemic Risk Masahiro Kawai, Asian Development Bank Institute, and Michael Pomerleano, World Bank -- 1. Introduction -- 2. Importance of Crisis Prevention -- 2.1 Policy mistakes behind the global financial crisis -- 2.1.1 Flaws in financial regulation and supervision -- 2.1.2 Failure of monetary policy to contain financial imbalances -- 2.1.3 Weak global financial architecture -- 2.2 Principles of crisis containment -- 2.3 Macroeconomic and financial surveillance and macroprudential supervision -- 3. Systemic Stability Regulation - Principles -- 3.1 Clear objectives and mandates of a systemic stability regulator -- 3.2 Sufficient regulatory resources to fulfill responsibilities -- 3.3 Effective implementation by the systemic stability regulator -- 3.4 Effective organization of a systemic stability regulator -- 4. Alternative Models of Systemic Stability Regulation -- 4.1 Global practices of central banks in financial stability -- 4.2 Reform proposals in the U.S., the U.K ., and the European Union -- 4.2.1 U.S. stability reform plan -- 4.2.2 U.K. stability reform plan -- 4.2.3 European Union reforms -- 4.3 Alternative models -- 5. Conclusions -- References -- Dealing with the Crises in a Globalized World: Challenges and Solutions Vincent R. Reinhart, American Enterprise Institute -- 1. A Romance of Geometry -- 2. Six Degrees of Separation -- 3. Crises and Learning from the Past -- 4. Conclusion -- References -- Systemic Risk: Is There a Playbook? Robert K. Steel, Wells Fargo & Co. -- IV. Dealing with the Crisis: The Role of the State -- Banking on the State Piergiorgio Alessandri and Andrew G. Haldane, Bank of England -- 1. Introduction.

2. Evolution in the Banking Safety Net -- 3. The Time-Consistency Problem and the Banking Safety Net -- 4. Resolving the Time-Consistency Problem -- 4.1 Redesigning the financial system -- 4.1.1 Introducing leverage limits -- 4.1.2 Recalibrating risk weights -- 4.1.3 Rethinking capital structure -- 4.1.4 Reconsidering the industrial organization of banking -- 4.2 Redesigning the safety net -- 4.2.1 A framework for the banking safety net -- 4.2.2 Time-consistent liquidity insurance -- 4.2.3 Time-consistent deposit insurance -- 4.2.4 Time-consistent capital insurance -- 5. Conclusion -- References -- Liquidity Risk and Central Bank Actions During the 2007-2009 Crisis Francesco Papadia, European Central Bank, and Tuomas Välimäki, Suomen Pankki -- 1. Introduction -- 2. The Implementation of Monetary Policy in Major Central Banks Before the Crisis -- 3. The Liquidity Component of the 2007-2009 Crisis -- 4. An Overall Interpretation of the Actions of Central Banks During the Crisis -- 5. An Assessment of the Effectiveness of Central Bank Actions -- 6. Conclusion -- References -- The Role of the State in a Crisis Phillip L. Swagel, Georgetown University -- 1. Introduction -- 2. The "Playbook" for Dealing with a Financial Crisis -- 3. The Plays Run During This Financial Crisis -- 3.1 Stabilize the financial system -- 3.2 Winnow insolvent banks -- 3.3 Ensure viability -- 3.4 Provide policy certainty -- 3.5 Provide clarity on balance sheets -- 4. Alternative Steps to Those Taken in Fall 2008 -- 5. Conclusion: What Could Have Been Done That Was Not Attempted? -- References -- Comments: Panel on the Role of the State Peter J. Wallison, American Enterprise Institute -- V. What to Do About Bubbles: Monetary Policy and Macroprudential Regulation.

Financial Instability and Macroeconomics: Bridging the Gulf Claudio Borio and Mathias Drehmann, Bank for International Settlements -- 1. Introduction -- 2. Financial (In)Stability: Definition -- 3. Financial (In)Stability: Measurement and Modeling -- 3.1 Role of measurement -- 3.2 A taxonomy -- 3.2.1 From balance sheet to market price indicators -- 3.2.2 Early warning indicators -- 3.2.3 Single-module measures: VARs -- 3.2.4 Multiple-module measures: macro stress tests -- 3.3 Overall assessment: from a financial stability to a macroeconomics perspective -- 4. Financial (In)Stability: Policy -- 4.1 Towards a macroprudential framework of regulation and supervision -- 4.2 Towards a more preemptive monetary policy -- 4.3 Towards a common research agenda -- 5. Conclusion -- References -- Is a Less Procyclical Financial System an Achievable Goal? Charles A. E. Goodhart, London School of Economics -- 1. Introduction -- 2. Measures That Enhanced Procyclicality -- 2.1 Assessment of capital adequacy -- 2.2 Liquidity -- 2.3 Remuneration -- 2.4 Direct constraints -- 2.5 Housing -- 2.6 Moral hazard -- 3. Countermeasures -- 3.1 Direct constraints on bank activity -- 3.2 Remuneration and risk taking -- 3.3 Insurance -- 3.4 Countercyclical regulation -- 3.5 Housing -- 4. Future Outcomes? -- References -- Bubbles? Allan H. Meltzer, Carnegie Mellon University -- 1. Economic Bubbles -- 2. Revisiting Bubbles -- Reference -- What to Do About Bubbles: Monetary Policy and Macroprudential Regulation Marvin Goodfriend, Carnegie Mellon University -- Reference -- VI. Dealing with Crises in a Globalized World: Challenges and Solutions -- Dealing with Crises in a Globalized World: Challenges and Solutions Athanasios Orphanides, Central Bank of Cyprus -- References.

Global Financial Reform: Diagnosis and Prognosis - A Network Approach Andrew L. T. Sheng, China Banking Regulatory Commission.