Barth kaufman the first great financial crisis of the 21st century; a retrospective (2016)

The First Great Financial
Crisis of the 21st Century
A Retrospective

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World Scientific–Now Publishers Series in Business
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Vol. 9 The First Great Financial Crisis of the 21st Century:

A Retrospective

edited by James R. Barth and George G. Kaufman


World Scientific – Now Publishers Series in Business: Vol.9

The First Great Financial
Crisis of the 21st Century
A Retrospective

James R. Barth

Auburn University, USA & Milken Institute, USA

George G. Kaufman
Loyola University Chicago, USA

World Scientific

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Published by
World Scientific Publishing Co. Pte. Ltd.
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Library of Congress Cataloging-in-Publication Data
The first great financial crisis of the 21st century : a retrospective / edited by James R. Barth
(Auburn University, USA & Milken Institute, USA), George G. Kaufman (Loyola University
Chicago, USA).

pages cm -- (World Scientific-Now Publishers series in business ; vol. 9)
ISBN 978-9814651240 (alk. paper)
1. Financial crises. I. Barth, James R. II. Kaufman, George G.
HB3722.F57 2015
330.9'0511--dc23
2014046647
British Library Cataloguing-in-Publication Data
A catalogue record for this book is available from the British Library.

Copyright © 2016 by editors and authors
All rights reserved.

In-house Editors: Dr. Sree Meenakshi Sajani/Qi Xiao

Typeset by Stallion Press
Email:

Printed in Singapore


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Contents
Preface
About the Authors

vii
xvii

Chapter 1 The Great Financial Crisis of 2007–2010:
The Sinners and their Sins
G.G. Kaufman
Chapter 2 The Costs of the 2007–2009 Financial Crisis
H. Rosenblum
Chapter 3 The US Financial Crisis and the Great Recession:
Counting the Costs
Gillian G.H. Garcia
Chapter 4 US Housing Policy and the Financial Crisis
Peter J. Wallison
Chapter 5 Playing for Time: The Fed’s Attempt to Manage
the Crisis as a Liquidity Problem
R.A. Eisenbeis and R. J. Herring
Chapter 6 Japan’s Financial Regulatory Responses to
the Global Financial Crisis
K. Harada, T. Hoshi, M. Imai, S. Koibuchi
and A. Yasuda
Chapter 7 Regulatory Response to the Financial Crisis
in Europe: Recent Developments (2010–2013)
S. Carbó-Valverde, H.A. Benink, T. Berglund
and C. Wihlborg

1
33

47
75

101

145

167

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Chapter 8

Chapter 9

Contents

Regulatory Change in Australia and New Zealand
Following the Global Financial Crisis
C.A. Brown, K.T. Davis and D.G. Mayes

219

The Dodd-Frank Act: Systemic Risk, Enhanced
Prudential Regulation, and Orderly Liquidation

G.G. Kaufman and R.W. Nelson

249

Chapter 10 The Trade Execution and Central Clearing
Requirements of Dodd-Frank Title VII —
Transparency, Risk Management, and Financial
Stability
R.S. Steigerwald
Chapter 11 A Primer on Dodd-Frank’s Title VIII
C. Baker
Chapter 12

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Macroliquidity: Selected Topics Related to Title XI
of the Dodd-Frank Act of 2010
W.F. Todd

267
283

299

Chapter 13 The Dodd-Frank Act: Key Features, Implementation
Progress, and, Financial System Impact
J.R. Barth, A. (Penny) Prabha and C. Wihlborg

337

Chapter 14 Hair of the Dog that Bit Us: The Insufficiency
of New and Improved Capital Requirements
E.J. Kane

377

Chapter 15 Misdiagnosis: Incomplete Cures
of Financial Regulatory Failures
J.R. Barth, G. Caprio Jr. and R. Levine

399

Chapter 16 Path-Dependent Monetary Policy in
the Post-Financial Crisis Era of Dodd-Frank
H. Rosenblum

433

Chapter 17 Bank Crisis Resolution and the Insufficiency
of Fiscal Backstops: The Case of Spain
S. Carbó-Valverde and M.J. Nieto

461

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Preface
In recent years, the world has suffered the worst financial crisis since the
Great Depression. Most countries, if not all, were affected in one way or
another, some far more severely than others. As a result of this dire situation, there has been an ongoing assessment of what went wrong and what
can be done to prevent a similar crisis in the future. Already a number of
affected countries have instituted major reforms in their financial regulatory regimes that are designed to ensure that “never again” will such a
devastating episode occur. Although there have been numerous studies of
the causes and consequences of the crisis, many of these were undertaken
before the financial and economic effects were fully realized and various
governmental policy responses were decided upon and actually implemented. This means that a more complete assessment is still needed of
what led to havoc in so many countries and whether the reforms that have
been implemented will accomplish their objective.
The purpose of the papers in this book is to provide a more thorough
assessment now that the worst events and the regulatory reforms are sufficiently behind us and much more information about these developments
is available. All of the papers were originally presented at the Western
Economic Association International Conference in Denver, Colorado, on
June 28, 2014. They cover events related to the global crisis that have
occurred in a number of countries between 2007 and 2010, including the
causes of the crisis, the costs of the crisis, and the regulatory responses to
the crisis. We now briefly point out the contribution made by each of the
papers in the book.
Importantly, George Kaufman argues that the crisis may be viewed as
the product of a perfect storm. He identifies the major culprits or sinners
of the US crisis and enumerates their more important sins. According to
him, the culprits include central bankers, commercial and investment
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bankers, credit rating agencies, financial engineers, the government,
investors, mortgage borrowers, mortgage brokers, and prudential bank
regulators. Among the numerous sins committed by these sinners, George
emphasizes the role of the government in encouraging and subsidizing
risky home mortgages and, in particular, the poor performance of the prudential regulators in adequately enforcing the in-place rules. He considers
the regulators to have been poor agents for the healthy banks and taxpayer
principals. He concludes that the prevention of a future crisis requires,
among other things, the development of better incentives to motivate the
regulators to be more faithful to both the letter and the spirit of the legislative intent of Congress.
In his paper, Harvey Rosenblum reviews the costs to the US economy
resulting from the financial crisis and its aftermath. The estimates of the
costs, according to him, depend to a large extent on how long it will take
the US to return to a more normal path of growth in economic activity. If
growth returns to pre-crisis trends in 2015, the cost of the crisis in terms
of lost output could be as little as $6 trillion, about 40% of annual US
output. If the return to pre-crisis trends takes considerably longer, the cost
of lost output could total $30 trillion, almost two years of human effort

down the drain. Harvey argues that including estimates of the reduced
opportunities and economic trauma faced by the generation of those
impacted by the crisis, as well as the costs of monetary and fiscal policy
extremes that were used to address the crisis, adds significantly to the
burdens stemming from the crisis. Given the enormity of these costs, he
believes it is critically important that the policy errors that led to the financial crisis not be repeated.
Gillian Garcia also focuses on the cost of the crisis, pointing out that
the its costs in the US range from lost GDP, depleted wealth, outlays and
subsidies expended to rescue troubled financial and commercial firms,
increased post-crisis regulation and supervision, and damage done to the
social fabric by higher unemployment, escalating bankruptcies and foreclosures, greater income and wealth inequality, reduced access to medical services, lower fertility, skyrocketing student debt, and growing
political alienation. However, she notes, there is no comprehensive discussion of the full panoply of the costs that the United States has endured.
Gillian therefore seeks to fill this gap by surveying and critiquing

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estimates of many individual components of the crisis’s costs. In doing
so, she argues that, on the one hand, estimates of lost GDP exaggerate the
cost when they compare recession values to pre-crisis trend GDP. Precrisis trends have been seriously overstated by failing to notice that

growth in labor and capital services and productivity were already declining before the crisis hit. On the other hand, Gillian argues, official estimates of the cost of assisting troubled firms with equity capital, loans,
and guarantees seriously underestimate the true costs of this particular
response to the crisis.
According to Peter J. Wallison, although the conventional explanation
for the financial crisis is that it was caused by insufficient or inadequate
government regulation of private-sector risk-taking, there is compelling
evidence that the underlying cause of the crisis was US government’s
housing policies, implemented primarily through the governmentsponsored enterprises Fannie Mae and Freddie Mac. According to him,
these policies, principally the affordable-housing goals administered by
the Department of Housing and Urban Development, forced the loosening
of traditional mortgage underwriting standards in order to make mortgage
credit more available to low-income borrowers. However, Peter emphasizes that the loosened standards spread to the wider market and helped to
build a massive housing price bubble between 1997 and 2007. By 2008,
he states that most of the mortgages in the US were subprime or otherwise
weak. Peter concludes that when the housing bubble deflated, these mortgages failed in unprecedented numbers, weakening the largest financial
institutions and causing a financial panic when Lehman Brothers was
allowed to fail.
Robert A. Eisenbeis and Richard J. Herring examine the events leading
up to the Great Recession, the US Federal Reserve’s response to what it
perceived to be a short-term liquidity problem, and the programs it put in
place to address liquidity needs from 2007 through the third quarter of
2008. They point out that these programs were designed to channel liquidity to some of the largest institutions, most of which were primary dealers.
Bob and Dick describe these programs, examine available evidence
regarding their effectiveness, and detail which institutions received the
largest amounts under each program. They then argue that increasing
financial fragility and potential insolvencies in several major institutions

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were evident prior to the crisis. Their conclusion is that while it is inherently difficult to disentangle issues of illiquidity from issues of insolvency, failure to recognize and address those insolvency problems delayed
necessary adjustments, undermined confidence in the financial system,
and may have exacerbated the crisis.
According to Kimie Harada, Takeo Hoshi, Masami Imai, Satoshi
Koibuchi, and Ayako Yasuda, Japan’s financial regulatory responses to the
global financial crisis and recession show two seemingly opposing trends:
(1) collaboration with international organizations to strengthen regulation
to maintain financial stability and (2) regulatory forbearance for banks
with troubled SME borrowers. They evaluate the post-crisis responses by
the Japanese financial regulators in five areas (Basel III, stress tests, OTC
derivatives regulation, recovery and resolution planning, and banking
policy for SME lending), and conclude that the effectiveness of the new
regulations for financial stability critically depend on the willingness of
the regulators to use the new tools.
In a paper by the European Shadow Financial Regulatory Committee,
Santiago Carbó-Valverde, Harald A. Benink, Tom Berglund, and Clas
Wihlborg provide an account of the financial crisis in Europe during the
period 2010–2013 and an analysis of how the relevant authorities reacted
to the crisis. The actions they consider include measures taken by central
banks, governments or fiscal authorities, and by regulatory or supervisory

bodies. It is noted that a previous study covers the regulatory developments during the financial crisis up until 2009, developments such as the
implementation of Basel III rules in Europe and the (mostly ad hoc and
unilateral) resolution mechanisms set in most European countries to fight
the crisis. Carbó-Valverde et al. focus on developments since 2010 and, in
particular, the concerns and actions that emerged with the sovereign debt
crisis in the euro area. In particular, the transition from the European
Financial Stability Facility (EFSF) to the European Stability Mechanism
(ESM) is assessed. Following these institutional developments, they note
that the focus after 2012 has progressively turned to the agreements and
remaining challenges of the European banking union. These issues are
jointly covered by the authors, along with some updates on the views of
the ESFRC on recent advances in other areas, such as solvency regulation.
All in all, Carbó-Valverde et al. find that weaknesses of the global

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financial system remain to be addressed, but they believe that the banking
union is one of the main tools and opportunities for an improved and
efficient crisis management in Europe.

Christine A. Brown, Kevin T. Davis, and David G. Mayes point out that
Australia and New Zealand escaped the worst of the financial crisis but
suffered some financial disruption (some part of which was home-grown).
They note that governments and regulatory authorities took significant
actions to limit the impacts of the crisis on the Antipodean financial markets. In their view, these have been important in determining the course of
subsequent regulatory change. Also important, according to them, has
been the task of dealing with the international regulatory agenda, which
has been focused on resolving structural and behavioural problems experienced in European and US financial sectors, but which were less apparent in the local markets.
Focusing on regulatory reform, George G. Kaufman and Richard W.
Nelson analyze the first two titles of the Dodd-Frank Wall Street Reform
and Consumer Protection Act, enacted in 2010. These titles deal with
financial stability, enhanced prudential regulation, and more orderly and
less costly resolution of large, troubled bank holding companies and nonbank financial institutions, and attempt to eliminate “too-big-to-fail” in
banking and finance. They conclude that while in the near-term DoddFrank will probably reduce both risk in banking and the magnitude of
financial intermediation, it is unlikely to do so in the longer term.
According to George and Richard, like nearly all major banking legislation
in the United States before it, Dodd-Frank promises more than it is likely
to deliver. The Act devotes insufficient attention to both economic incentives and continued innovations in technology and banking practices. The
authors conclude that, through time, the result should be the emergence of
a financial system much like the pre-2007 system, with renewed fragility.
According to Robert S. Steigerwald, the bankruptcy of Lehman
Brothers, the subsequent rescue of American International Group, and
related events in the fall of 2008 marked a turning point in the financial
crisis. Among other things, he points out that these events focused attention on over-the-counter derivatives (or “swaps”) and provided the impetus for increased regulation of the OTC swaps market. Title VII of the
Dodd-Frank Wall Street Reform and Consumer Protection Act provides a

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comprehensive framework for swaps regulation and is intended to promote financial stability. Among other things, Title VII requires swap dealers (and certain other market participants) to register with regulatory
authorities and meet new capital adequacy, collateral, recordkeeping, and
reporting obligations. Title VII also requires swaps (subject to certain
exceptions) to be: (1) traded on exchanges or centralized trading platforms
(called “swap execution facilities” or “security-based swap execution
facilities”); and (2) cleared through central counterparty clearinghouses.
Robert briefly discusses some of the implications of the trade execution
and clearing requirements of Title VII for transparency, risk management,
and financial stability.
Colleen Baker states that, although little known or discussed, Title VIII
is one of the most fundamental parts of Dodd-Frank. It expands the
Federal Reserve’s supervision and regulation of payment, clearing, and
settlement systems. Most important, it greatly expands the coverage of the
federal safety net. Accordingly, Title VIII bears upon many public policy
issues, such as too-big-to-fail financial institutions. Colleen therefore first
provides an overview of the rationale behind Title VIII, then proceeds
with a summary of its contents, and concludes by highlighting several of
these policy considerations.
Walker F. Todd examines Title XI of the Dodd-Frank Act, which governs the Federal Reserve’s emergency financial assistance under Section
13(3) of the Federal Reserve Act. He notes that in 2008 the Fed invoked
Section 13(3) multiple times to assist investment banks and others. The

peak amount of the Fed’s loans under all facilities (including foreign currency swap agreements) was about $1.675 trillion, over $400 billion under
Section 13(3) alone. According to Walker, the Fed’s emergency loans usually were directed to specific firms and often were secured by collateral of
doubtful credit worthiness. As he points out, Title XI of Dodd-Frank now
restricts such loans. Instead of specific firms, Section 13(3) assistance
must be provided under broad-based facilities of general eligibility and
must be secured by collateral of ascertainable lending value. The duration
of such assistance is limited. The Secretary of the Treasury (and through
him or her, the president) must approve all such assistance. Initial, periodic, and final reports are to be filed with the chairman and ranking member of the Senate and House banking and financial services committees.

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In another paper focusing on regulation, James R. Barth, Apanard
(Penny) Prabha, and Clas Wihlborg provide a broad assessment of DoddFrank. They put the legislation into historical perspective, identify its key
features, discuss the implementation progress, and assess whether the law
will accomplish its objectives. Barth, Prabha and Wihlborg conclude that
the approach in the law to financial regulatory reform is best described as
a Band-Aid approach to financial regulation. A better approach in their
view is one that strengthens market discipline on bank risk-taking and
enhances competition so as to reduce the regulatory burden and enhance

the efficiency and stability of the financial system. According to them,
Dodd-Frank pays lip service to this objective with the creation of an
Orderly Liquidation Authority and the Financial Stability Oversight
Council, with the effectiveness of both these new bodies being very much
in doubt.
Edward J. Kane argues that government safety nets give protected institutions an implicit subsidy, and intensify incentives for value-maximizing
boards and managers to risk the ruin of their firm. According to him,
standard accounting statements do not record the value of this subsidy,
and forcing subsidized institutions to show more accounting capital will
do little to curb their enhanced appetite for tail risk. In his paper, Ed proposes accounting and ethical standards that would reclassify the legal
status of the safety net financial support a firm receives, and record it as
an equity investment. The purpose of his proposal is to recognize statutorily that a safety net is a contract that promises to deliver loss-absorbing
equity capital to firms at times when no other investors will. The explicit
recognition of the public’s stakeholder interest in economically, politically, and administratively difficult-to-unwind firms, according to him, is
a first and necessary step toward assigning to their managers enforceable
fiduciary duties of loyalty, competence, and care toward taxpayers. His
second step in this process is to change managerial behavior: to implement and enforce a series of requirements and penalties that can lead
managers to measure and record on the balance sheet of each subsidized
firm — as a special class of equity — the capitalized value of the safety
net subsidies it receives from its taxpayer put. Ed believes that incentives
to report and service this value accurately in corporate documents, and in
government reports making use of them, should be enhanced by installing

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civil sanctions, such as a call on the personal wealth of managers and
officials who can be shown to have engaged in actions intended to corrupt
the reporting process, and by defining a class of particularly vexing acts
of safety net arbitrage as criminal theft.
In a paper with a quite different twist, James R. Barth, Gerard Caprio
Jr., and Ross Levine point out that regulatory authorities in countries
around the world are attempting to improve financial regulation and
supervision. In the aftermath of the global financial crisis, these attempts
involve a three-step process: (1) diagnose what went wrong, (2) design
regulatory and supervisory reforms that address these defects, and
(3) implement the corrective reforms. They argue that US efforts to
enhance financial regulation and supervision have faltered along each of
these three dimensions. In particular, Jim, Jerry, and Ross provide numerous examples demonstrating that US authorities misdiagnosed, or perhaps
in some cases even wilfully disregarded, the causes of the crisis both by
overemphasizing factors that did not play decisive roles in causing the
onset or severity of the crisis and by underemphasizing factors that did. To
increase regulatory accountability and help prevent another financial crisis, they propose the creation of an agency that would have access to all
of the information available to regulators and whose sole function would
be to publish regular reports on the key systemic risks in the financial
system, and assessments of the adequacy of regulators’ responses.
Shifting from regulation to monetary policy, Harvey Rosenblum
reviews the major monetary policy actions taken by the Federal Reserve
to address the economic and financial collapse during and following the
financial crisis. His paper carefully reviews and analyzes the extreme

measures that were taken by the Fed, including its zero interest rate policy; the series of unconventional monetary policy programs, including
three rounds of Large Scale Asset Purchases; and a variety of special lending programs that extended the federal safety net to non-bank businesses.
The Fed’s crisis communications strategies are evaluated; Harvey believes
the Fed needs to put more effort into communicating its policies to the
general public, and needs to be more sensitive to the dangers of providing
forward guidance that ultra-low interest rates will prevail in the future,
even after significant economic improvements have occurred. According
to him, a healthy banking and financial sector is an absolute prerequisite

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for monetary policy to achieve its goals; however, Dodd-Frank does little
to improve the resilience of the financial system, and thereby is likely to
undermine the efficacy of monetary policy in the future.
Santiago Carbó-Valverde and María J. Nieto analyze the Spanish financial crisis and the national and European policymakers’ response that
resulted in the successful completion of a major program of financialsector reform outlined in the Memorandum of Understanding on Financial
Sector Policy Conditionality (MoU) of July 20, 2012. They conclude that
some of the conditions established in the MoU were particularly efficient
in dealing effectively with the banking crisis in Spain.

We are extremely grateful to the authors for contributing their outstanding papers to our book, and to the Smith–Richardson Foundation for
partial financial support for this project. The authors are also deeply
indebted to Dinah McNichols for her excellent editing of all the papers,
and for her tireless efforts at keeping the project on schedule.
James R. Barth and George Kaufman

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About the Authors
Apanard (Penny) Prabha was a Senior Economist at the Milken Institute
at the time of writing the chapter in this book. She is also an Adjunct
Instructor at the University of Illinois, Springfield. Her research expertise

is in the areas of financial institutions and international finance. Her
research work has been published in many peer-reviewed journals and
presented at international economic and finance conferences. They are
published in the Journal of International Money and Finance, Journal of
Banking Regulations, International Review of Finance, Open Economies
Review, Journal of International Financial Markets, Institutions &
Money, and Journal of Financial Economic Policy, among others. Prabha
was also an Assistant Professor of economics at the University of Illinois
at Springfield, a visiting scholar at the Claremont Institute for Economic
Policy Studies and the Freeman Program in Asian Political Economy at
the Claremont Colleges, and a lecturer of economics at Pitzer College and
the University of Redlands. She holds a PhD in economics from the
Claremont Graduate University.
Ayako Yasuda is an Associate Professor of Finance at the Graduate
School of Management at the University of California, Davis. She was
previously a faculty member in the finance department at The Wharton
School of the University of Pennsylvania. Yasuda received a BA and PhD
in Economics from Stanford University. She has received numerous professional awards and has published in leading academic journals, such as
the Journal of Finance, Journal of Financial Economics, and the Review
of Financial Studies. Her research has also been featured in leading media
outlets, such as The Financial Times, The Economist, The New York Times,
and The Wall Street Journal. She coauthored an MBA course textbook,
Venture Capital and the Finance of Innovation, which has been adopted at
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many of the world’s top universities, including Chicago, Duke, Harvard,
New York University, the University of California (multiple campuses),
the University of Southern California, the University of Pennsylvania
(Wharton), and Yale. She is a Fellow of the Wharton Financial Institutions
Center at the University of Pennsylvania.
Christine A. Brown is currently Head of Department and Professor of
Finance in the Department of Banking and Finance at Monash University,
Australia. She completed her PhD at the University of Melbourne and,
prior to joining Monash University in 2010, held several positions at the
University of Melbourne. She has also held visiting research positions at
the University of Strathclyde, Queens University Belfast, and Manchester
University in the UK. Her main research interests are in corporate finance
with a particular focus on share repurchases, derivative pricing, infrastructure financing, including public-private partnerships and financial institutions management. Her publications have appeared in Abacus, Journal of
Banking and Finance, Journal of Financial Research, Australian Journal
of Management, Journal of Futures Markets, International Review of
Finance, and Accounting & Finance, among others.
Clas Wihlborg has held the Fletcher Jones Chair in International Business
at the Argyros School of Business and Economics at Chapman University
in Orange, California, since January 2008. He has a PhD from Princeton
University and has held faculty positions in finance and international business at New York University, and in finance and business economics at the
University of Southern California. At Göteborg University in Sweden, he
was head of the financial economics programs before moving in 2000 to

the Copenhagen Business School (CBS) in Denmark, where he was a
Professor of finance and Director for the Center for Law, Economics and
Financial Institutions (LEFIC). He received an honorary doctorate from
Lund University in 2009. Wihlborg is a member of the European Shadow
Financial Regulatory Committee and the Royal Swedish Academy of
Engineering Sciences (IVA). His research and teaching have focused on
international macro and finance, corporate finance, international financial
management, and law and economics with an emphasis on financial institutions. In these areas, he has published numerous journal articles and

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books, and most recently served as coeditor of Research Handbook on
International Banking and Governance.
Colleen Baker has taught at the University of Illinois College of Business,
the University of Notre Dame Law School, Villanova Law School, and
The Wharton School of the University of Pennsylvania. Dr. Baker is an
expert in banking and financial institutions law and regulation, with extensive knowledge of over-the-counter derivatives regulation, derivatives
clearing, Dodd-Frank, and bankruptcy areas. She previously worked as a
lawyer at Allen & Overy LLP and as an information technology associate

at Morgan Stanley. Dr. Baker received a PhD from The Wharton School
of the University of Pennsylvania and a JD/MBA from the University of
Virginia. Her publications can be accessed via (Social Science Research
Network) SSRN’s eLibrary Database.
David G. Mayes is a Professor of Banking and Financial Institutions and
Director of the New Zealand Governance Centre at the University of
Auckland. He was previously an Advisor to the Board at the Bank of
Finland and Professor of Economics at London South Bank University.
He is a former Chief Manager (now Assistant Governor) of the Reserve
Bank of New Zealand and Director of the NZ Institute of Economic
Research in Wellington. His research is focused on problems of integration, particularly in the financial and monetary field. He has published
widely in international journals and has more than forty books, to his
credit including, recently, Globalisation, the Global Financial Crisis and
the Role of the State, with John Farrar. He is an editor of the Economic
Journal.
Edward J. Kane is a Professor of Finance at Boston College. From 1972
to 1992, he held the Everett D. Reese Chair of Banking and Monetary
Economics at The Ohio State University. A founding member of the
Shadow Financial Regulatory Committee, Kane rejoined the organization in 2005. He served for 12 years as a trustee and member of the
finance committee of the Teachers Insurance. He currently consults for
the World Bank and is a Senior Fellow in the Federal Deposit Insurance
Corporation’s Center for Financial Research. Kane has consulted for

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numerous agencies, including the IMF, components of the Federal
Reserve System, and three foreign central banks. He consulted as well
for the Congressional Budget Office, the Joint Economic Committee, and
the Office of Technology Assessment of the US Congress. He is a past
president and fellow of the American Finance Association and a former
Guggenheim fellow. He served as President of the International Atlantic
Economic Society and the North American Economics and Finance
Association. Kane is a longtime research associate of the National
Bureau of Economic Research. He has authored three books and coauthored or coedited several more.
George G. Kaufman is the John F. Smith Professor of Economics and
Finance at Loyola University, Chicago and Consultant to the Federal
Reserve Banks of Chicago. Previously he was an economist at the Federal
Reserve Bank of Chicago and the John Rogers Professor of Banking and
Finance at the University of Oregon. Kaufman has published widely in
professional journals and books, and is the founding editor of the Journal
of Financial Stability and of the Journal of Financial Services Research.
He is a former president of the Western Finance Association, the Midwest
Finance Association, the Western Economics Association, and the North
American Economic and Finance Association, and a former director of the
American Finance Association. He serves as the Co-Chair of the Shadow
Financial Regulatory Committee. He holds a PhD in economics from the
University of Iowa.
Gerard Caprio Jr. is the William Brough Professor of Economics at
Williams College, Chair of the Center for Development Economics at

Williams, and a Senior Fellow at the Milken Institute Center for Financial
Markets. Previously he was the director for policy at the World Bank and
head of financial sector research. His research included establishing the
first databases on banking crises around the world and on bank regulation
and supervision. Caprio’s latest book is The Guardians of Finance:
Making Regulators Work for Us, with James R. Barth and Ross Levine
(MIT Press, 2012), with whom he also wrote Rethinking Bank Regulation:
Till Angels Govern (Cambridge University Press, 2006). He is a co-editor
of the Journal of Financial Stability. Earlier positions include: vice

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president and head of Global Economics at JP Morgan, and economist
positions at the Federal Reserve Board and the IMF. He has taught at
Trinity College Dublin, where he was a Fulbright Scholar, and at George
Washington University.
Gillian G.H. Garcia is an international financial economist who has
recently worked with University of Maryland, the International Monetary
Fund, the World Bank, and financial consulting firms. She is the author of

six books and numerous papers on financial topics, and has taught at the
University of California, Berkeley, and Georgetown University. She pursued her earlier career in the United States at the Office of the Comptroller
of the Currency, the Hoover Institution at Stanford University, Federal
Reserve Bank of Chicago, the US Government Accountability Office, and
the Senate Banking Committee. She subsequently joined the IMF to provide technical assistance to countries responding to international financial
crises and initiating systems of depositor protection. Now mostly retired,
she writes and presents research papers.
Harald A. Benink was appointed Professor of Banking and Finance and
Fellow of the Centre for Economic Research (CentER) at Tilburg
University in 2008. At Tilburg University he also served as Dean of
International Affairs and Member of the Executive Board at the School of
Economics and Management during the period 2008–2011. He has also
been a Research Associate to the Financial Markets Group (FMG) of the
London School of Economics since 2001. Before joining Tilburg
University, Benink was Professor of Finance at the Rotterdam School of
Management, Erasmus University during the period 1999–2008. His
research focuses on banking and finance and on European financial and
monetary integration. He has published in various academic journals
(including The Journal of Finance and the Journal of Empirical Finance),
and has published the book Financial Integration in Europe, among others. Benink is Founder and Chairman of the European Shadow Financial
Regulatory Committee (1998) and took the initiative for setting up the
Shadow Financial Regulatory Committees in Latin America (2000), Asia
(2004), and Australia–New Zealand (2006). He holds a master’s degree in
economics from Tilburg University, a master’s degree in financial

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economics from TiasNimbas Business School, Tilburg University, and
received his PhD degree in finance and economics from Maastricht
University.
Harvey Rosenblum is Professor of financial economics in the Cox
School of Business at Southern Methodist University, where he has taught
since 1986. After 43 years with the Fed, Rosenblum recently retired from
the Federal Reserve Bank of Dallas as Executive Vice President and
Director of Research. He serves as a Research Associate for the Dallas
Fed’s Globalization and Monetary Policy Institute, and continues to contribute to the Dallas Fed’s publications, Economic Letter and Staff Papers.
Rosenblum began his career in 1970 as an economist with the Federal
Reserve Bank of Chicago, where he advanced to become vice president
and associate director of research in 1983. He joined the Dallas Fed as
senior vice president and director of research in 1985 and became executive vice president in 2005. At SMU’s Cox School of Business, Rosenblum
currently teaches monetary policy and financial institutions in the MBA
program, and macroeconomics in the Executive MBA program. He was a
visiting professor of finance at DePaul University from 1973 to 1985, and
at the University of Oregon from 1977–1978. Rosenblum received a BA
in economics from the University of Connecticut in 1965 and a PhD in
economics from the University of California, Santa Barbara, in 1972.
James R. Barth is the Lowder Eminent Scholar in Finance at Auburn
University, a Senior Fellow at the Milken Institute, and a Fellow at the
Wharton Financial Institution Center. His research focuses on financial

institutions and capital markets, both domestic and global, with special
emphasis on regulatory issues. Barth has been a visiting scholar at the US
Congressional Budget Office, Federal Reserve Bank of Atlanta, Office of
the Comptroller of the Currency, and the World Bank. His most recent
books are Guardians of Finance: Making Regulators Work for Us, with
Gerard Caprio Jr. and Ross Levine (MIT Press) in 2012; Fixing the
Housing Market: Financial Innovations for the Future, with Franklin
Allen and Glenn Yago (Wharton School Publishing-Pearson) in 2012;
Rise and Fall of the U.S. Mortgage and Credit Markets, with Tong Li,
Wenling Lu, Triphon Phumiwasana, and Glenn Yago (John Wiley & Sons)

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in 2009; and Rethinking Bank Regulation: Till Angels Govern, with Gerard
Caprio Jr. and Ross Levine (Cambridge University Press) in 2009.
Kevin T. Davis is Professor of Finance at the University of Melbourne,
Research Director of the Australian Centre for Financial Studies, and a
Professor of Finance at Monash University. His primary research interests
are financial regulation, financial institutions and markets, financial innovation, and corporate finance. He is a co-author/editor of 16 books in the

areas of finance, banking, monetary economics, and macroeconomics, and
has published numerous journal articles and chapters in books. He is the
Deputy Chair of SIRCA, a member of the Australian Competition
Tribunal, and has undertaken an extensive range of consulting assignments for financial institutions, business and government. Professor Davis
is a Senior Fellow of Finsia, a Fellow of FTA, and holds a Bachelor of
Economics (Hons I) from Flinders University of South Australia and a
Master of Economics from the Australian National University. He was
appointed by the Federal Treasurer in December 2013 as a panel member
of the Financial System Inquiry chaired by Mr. David Murray.
Kimie Harada is a Professor at Chuo University. Harada’s career includes
membership in numerous government committees. She currently serves as
member of the Financial Services Agency (FSA)’s Financial System
Council, a member of the Fiscal Investment and Loan Program
Subcommittee of the Ministry of Finance’s Fiscal System Council, a
member of the Ministry of Finance’s Independent Administrative
Institution Evaluation Committee, and the acting chairperson of
Agriculture, Forestry, and Fisheries Credit Foundations. Additionally, she
is a public board member of the Self-Regulation Board of Japan Securities
Dealers Association (JSDA). Harada has published in academic journals
such as Journal of Money, Credit and Banking, and Journal of the
Japanese and International Economies. She is a Research Fellow at the
Tokyo Center for Economic Research (TCER) and at the Japan Securities
Research Institute, and a member of the editorial board of Japan’s
Securities Analysts Journal. She holds a Wine Expert appellation qualification of the Japan Sommelier Association and conducts research centering on the financial field, and wine as well. Harada holds two BAs from

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Osaka University and an MA and PhD in economics from the University
of Tokyo.
María J. Nieto is an Associate to the Director General Bank Regulation
and Financial Stability at the Bank of Spain. Nieto has been a contributor
on these topics to the Bank for International Settlements, European
Central Bank, European Commission and OECD. She has cooperated as
a consultant with the IMF, as well as the Federal Reserve Bank of Atlanta.
She is the author of several articles that have been published, among others, by the Journal of Banking and Finance, Journal of Financial Stability,
European Financial Management, and Journal of Business Research.
Nieto is a member of the editorial boards of the Journal of Banking
Regulation and Journal of Financial Regulation and Compliance. She has
developed her career at the European Central Bank, Council of Economic
Advisors to the Spanish President, the European Bank for Reconstruction
and Development, and the IMF. Nieto received an MBA from the
University of California, Los Angeles, and a PhD cum laude from the
Universidad Complutense de Madrid. She is also a CPA and was recipient
of the Fundación Ramón Areces.
Masami Imai is a Professor of Economics at Wesleyan University in
Middletown, Connecticut. He teaches money, banking, and financial markets, quantitative methods in economics, and the economy of Japan. He has
a PhD in economics from the University of California, Davis, and a BA in
economics from the University of Wisconsin, Eau Claire. He received support from Center for Financial Research at the Federal Deposit Insurance
Corporation in 2008 and was awarded the most significant paper published

in 2012 in the Journal of Financial Intermediation. He is a member of the
Japanese Shadow Financial Regulatory Committee and also a research fellow at Tokyo Center for Economics Research (TCER). His research
focuses on banking and has been published in the American Economic
Journal: Macroeconomics, Journal of Money, Credit, and Banking, Journal
of Financial Intermediation, Journal of Law and Economics, Journal of
Public Economics, and Journal of Development Economics, and Journal of
Banking and Finance, as well as other scholarly journals.

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