Regulating Wall Street: The Dodd-Frank Act and the New Architecture of Global Finance / Edition 1

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"Experts from NYU Stern School of Business analyze new financial regulations and what they mean for the economy The NYU Stern School of Business is one of the top business schools in the world thanks to the leading academics, researchers, and provocative thinkers who call it home. In Regulating Wall Street: The New Architecture of Global Finance, an impressive group of the Stern school's top authorities on finance combine their expertise in capital markets, risk management, banking, and derivatives to assess the strengths and weaknesses of new regulations in response to the recent global financial crisis.Summarizes key issues that regulatory reform should address Evaluates the key components of regulatory reformProvides analysis of how the reforms will affect financial firms and markets, as well as the real economy The U.S. Congress is on track to complete the most significant changes in financial regulation since the 1930s. Regulating Wall Street: The New Architecture of Global Finance discusses the impact these news laws will have on the U.S. and global financial architecture"-- Provided by publisher.

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Editorial Reviews

From the Publisher
"A fascinating, lively, and thoroughly readable guide to the Dodd-Frank Act that pierces the cloud of confusion that hangs over so much of the financial reform debate. It is extremely timely and valuable, and should be required reading for all policymakers, investors, and students of finance. What makes the book so valuable is that it not only analyzes the scope of the Act, in a punchy, lively style, but it also discusses its potential impact. More important, the book analyzes what is not covered in the Act—and where the potential challenges to the financial system still lie."
Gillian Tett, U.S. Managing Editor, Financial Times

"The crisis of 2008 confronted even well-educated Americans with a flood of incomprehensible financial vocabulary, describing novel financial institutions and practices most of us had never heard of before. Now we have the 2,300-page Dodd-Frank Act, designed to provide the needed repair. Will it do so? What else will it do? How can we even start to think about these basic questions? Regulating Wall Street addresses these questions in a clear, direct style, taking us through the many parts of the Act one at a time, and providing informed, cogent economic analysis of each. A valuable standard source for future discussion."
Robert E. Lucas, University of Chicago, 1995 Nobel Laureate

"Take the faculty of one of the best finance departments in the world. Ask them to analyze the new U.S. legislation on financial regulation, and to think about what the new law gets right, what it gets wrong, and how it is likely to shape the future of the financial system. With a bit of luck, you get this very impressive book. An absolute must-read."
Olivier Blanchard, Chief Economist, International Monetary Fund

"Regulating Wall Street goes a long way toward clarifying the intent of the various provisions of the Dodd-Frank Act and evaluating both its effectiveness and limitations. The need for effective implementation by agencies is appropriately emphasized. Not a quick read, a useful reference work on an enormously complex piece of legislation, dealing with an even more complex financial reality."
Paul Volcker, Chairman of the Economic Recovery Advisory Board and former Chairman of the Federal Reserve (1979–1987)

“There are many villains in the story of the recent crisis and much written to name them, describe them and even curse them. . .  If you want to know how to fix the problem, I highly recommend ‘Regulating Wall Street,’ from New York University’s Stern School of Business. . .  In the excellent book, ‘Regulating Wall Street,’ several of the studies indicate that there are few synergies among financial activities that could lead to economies of scope. The studies also demonstrate that multiple functions in large, complex firms can actually increase systemic risk. Moreover, they suggest that the spun-off activities could thrive without explicit or implied government support.  The conclusion in this book is that separating activities in this manner, together with stronger resolution processes and better capital standards, would do much to strengthen our financial system, making it more accountable and stronger.”
Thomas M. Hoenig, President, Federal Reserve Bank of Kansas City

"Readers should read Regulating Wall Street to understand why, in the face of market failures and copious evidence that Wall Street is unproductive, Congress and regulators labored mightily to resurrect the financial intermediation racket just as it existed on September 12, 2008." (Tax Notes)

“If you want to know how to fix the problem, I highly recommend Regulating Wall Street, from New York University’s Stern School of Business.”
Karl Denninger, Seeking Alpha

“One refreshing sign of hope for constructive change is that economists, some of whose theories had much to do with a light regulatory approach toward derivatives and the housing bubble, are increasingly producing research calling for stricter guidelines then Dodd-Frank or the Obama administration. Regulating Wall Street presents a wide range of new research supporting stronger regulations than Dodd-Frank recommends, such as . . . tax proposals. . . In the prologue of Regulating Wall Street, the editors, hardly known as progressives, remind financiers how useful strong regulations were in the past. . . We would be better off if the powers on Wall Street would remember. . . “
(New York Review)

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Product Details

  • ISBN-13: 9780470768778
  • Publisher: Wiley
  • Publication date: 11/9/2010
  • Series: Wiley Finance Series , #608
  • Edition number: 1
  • Pages: 592
  • Sales rank: 967,619
  • Product dimensions: 6.30 (w) x 9.10 (h) x 2.00 (d)

Meet the Author

Viral V. Acharya is Professor of Finance at New York University Stern School of Business.

Thomas F. Cooley is Dean Emeritus and the Paganelli-Bull Professor of Economics at New York University Stern School of Business, as well as a Professor of Economics in the NYU Faculty of Arts and Science.

Matthew P. Richardson is the Charles E. Simon Professor of Applied Financial Economics at New York University Stern School of Business.

Ingo Walter is the Seymour Milstein Professor of Finance, Corporate Governance and Ethics and Vice Dean of Faculty at New York University Stern School of Business.

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Table of Contents


Introduction: A Bird's Eye View of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The Backdrop for the Dodd-Frank Act of 2010.

Assessing the Dodd-Frank Act Using the Economic Theory of Regulation.

Learning from the Lessons of the 1930s.

Preventing the Last Crisis – How Would the Dodd-Frank Act Have Performed?




Part One: Financial Architecture.

Chapter 1: The Architecture of Financial Regulation.

1.1 Walking the Regulatory Tightrope.

1.2 Alternative Approaches to Financial Regulation.

1.4 The Legislation.

1.5 Summary.



Chapter 2: The Power of Central Banks and the Future of the Federal Reserve System.

2.1 The Historical Background.

2.2 The Federal Reserve and the Dodd-Frank Bill.

2.3 The Post-Crisis Role of a Central Bank: A Benchmark for Measuring Dodd-Frank.

2.4 Summary.


Chapter 3: Consumer Finance Protection.

3.1 Overview.

3.2 The Crisis and the Dodd-Frank Act.

3.3 Evaluation of the BCFP.


Part Two: Systemic Risk.

Chapter 4: Measuring Systemic Risk.

4.1 Overview.

4.2 The Dodd-Frank Wall Street Reform and Consumer Protection Act.

4.3 Evaluation of the Dodd-Frank Act.

4.4 NYU Stern Systemic Risk Rankings.

Appendix A: List of 30 International Systemically Risky Institutions published by the Financial Stability Board (FSB).

Appendix B: Supervisory Capital Assessment Program15 (SCAP).

Appendix C: Marginal Expected Shortfall (MES) and Supervisory Stress Test (SCAP).



Chapter 5: Taxing Systemic Risk.

5.1 Systemic Risk and the Financial Crisis of 2007-2009.

5.2 Regulating Systemic Risk.

5.3 The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

5.4 A Tax on Systemic Risk.

5.5 Summary.



Chapter 6: Capital, Contingent Capital and Liquidity Requirements.

6.1 Overview.

6.2 The Financial Crisis of 2007-2009.

6.3 Basel III and The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

6.4 Contingent Capital: A Solution?

Appendix A: Trust Preferred Securities.



Chapter 7: Large Banks and the Volcker Rule.

7.1 Overview.

7.2 LCFIs and the Financial Crisis of 2007-2009.

7.3 The Economics of LCFIs.

7.4 The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

7.5 The Dodd-Frank Act and LCFIs: Looking Forward.



Chapter 8: Resolution Authority.

8.1 Overview.

8.2 The Financial Crisis of 2007-2009.

8.3 The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

8.4 Looking Forward: What If a LCFI Fails? Receivership, Bankruptcy, Living Wills and Forbearance.

8.5 Summary.



Chapter 9: Systemic Risk and the Regulation of Insurance Companies.

9.1 Existing Structure and Regulation of the U.S. Insurance Industry.

9.2 The Dodd–Frank Wall Street Reform and Consumer Protection Act in Relation to Insurance Regulation.

9.3 Evaluation of Stipulations about Insurance Regulation and Recommendations for Reform.

9.4 Regulation of Insurance Companies' Systemic Risk.

9.5 The Importance of Federal Regulation for Insurance Companies.

9.6 Insurance Accounting.

9.7 Summary.

Appendix A: The Case of AIG.

Appendix B: Systemic Risk Measurement: An Example34.



Chapter 10: Money Market Funds - How to Avoid “Breaking the Buck”.

10.1 Overview.

10.2 Primer on Money Market Funds.

10.3 Money Market Funds During the Financial Crisis.

10.4 Government Response to Lehman's Bankruptcy.

10.5 New Regulation and Assessment.

10.6 Recommendations.


Chapter 11: The Repurchase Agreement (Repo) Market.

11.1 Overview.

11.2 A Primer on the U.S. Repo Market.

11.3 Evolution of the U.S. Repo Market.

11.4 The Crisis.

11.5 A Case for Reforming the Repo Market.

11.6 Proposed Reforms.

11.7 Going Forward.



Part Three: Shadow Banking.

Chapter 12: Hedge Funds, Mutual Funds and ETFs.

12.1 U.S. Legislation and the EU Proposal.

12.2 U.S. Legislation Concerning the Systemic Risk Imposed by Hedge Funds.

12.3 U.S. Legislation Concerning Protection of Hedge Fund Investors

12.4 EU Directive Concerning U.S.-Based Funds.

12.5 Volcker Rule.

12.6 Conclusions



Chapter 13: Regulating OTC Derivatives.

13.1 Overview.

13.2 The “Wall Street Transparency and Accountability” Part of the Dodd-Frank Act of 2010.

13.3 Evaluation of Current Proposals.

13.4 Clearing, margins, transparency, and systemic risk of clearinghouses.

13.5 Conclusion: How will the derivatives reforms affect global finance in future?

Appendix A: Items concerning OTC derivatives left by the Dodd-Frank Act for future study.

Appendix B: Current OTC Disclosure Provided by Dealer Banks.

Appendix C: Sovereign Credit Default Swaps Markets.



Part Four: Credit Markets.

Chapter 14: The Government-Sponsored Enterprises.

14.1 Overview.

14.2 The Beginnings.

14.3 The Crisis.

14.4 Recommendations

14.5 Way Forward: Projections to the Future If the GSEs Are Not Fixed.



Chapter 15: Regulation of Rating Agencies.

15.1 Overview.

15.2 The Crisis.

15.3 Public Interest Objectives of Rating Regulation.

15.4 The Dodd-Frank Wall Street Reform and Consumer Protection Act (2010).

15.5 Conflicts of Interest.

15.6 Looking Forward.



Chapter 16: Securitization Reform.

16.1 Overview.

16.2 The Financial Crisis and Securitization.

16.3 The Dodd-Frank Wall Street Reform and Consumer Protection Act.

16.4 Evaluation of the Proposals.

16.5 Conclusion.

Appendix: Accounting Standards for Securitization (FAS 166/167 Dodd-Frank Act, and the Banking Agencies' Rules).



Part Five: Corporate Control.

Chapter 17: Reforming Compensation and Corporate Governance.

17.1 Key Issues.

17.2 The Crisis.

17.3 Short-Term Measures and Early-Stage Proposals.

17.4 U.S. Guidelines for Compensation and Corporate Governance.

17.5 The Dodd-Frank Act [this and subsequent sections #s were off].

17.6 Analysis.

17.7 Evaluation of the Dodd-Frank, Federal Reserve, and G20 Compensation Reforms.

17.8 International Compensation Developments.

17.9 Is Corporate Governance of Financial Firms Special?

17.10 Conclusions.



Chapter 18: Accounting and Financial Reform.

18.1 Banks’ Loan Loss Reserving.

18.2 Market Illiquidity and Fair Value Measurement.

18.3 Derivatives and Other Instruments with Embedded Leverage.

18.4 Bank Regulators Should Not Meddle in GAAP.

18.5 Convergence with International Accounting Standards.




About the Editors.


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