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New Report Targets Ways to Reduce Threats to U.S. Financial System

September 5, 2014

WASHINGTON, DC, September 5, 2014 — The Bipartisan Policy Center’s Financial Regulatory Reform Initiative recently released Responding to Systemic Risk: Restoring the Balance, a new report of the Initiative’s Systemic Risk Task Force that aims to improve the regulation and supervision of the U.S. financial system. Covington & Burling’s John C. Dugan, a task force co-chair and member, co-authored the report, which recommends ways more effectively to monitor risk to the financial system, prevent damaging runs and panics, and combat future financial crises. Mr. Dugan’s co-chairs and co-authors are Peter R. Fisher and Cantwell F. Muckenfuss III.

“During the 2008 crisis, government officials were grateful to have ‘break-the-glass-in-an-emergency’ authority to address unforeseen problems at individual firms,” said Mr. Dugan, former Comptroller of the Currency and chair of Covington’s Financial Institutions Group. “Future government officials need to have that same emergency authority to address future unanticipated problems that threaten financial stability – but only in true emergencies and only with appropriate safeguards.”

The 73-page report includes recommendations to:

• Restore the Federal Reserve’s ability to make emergency loans to individual non-depository institutions;
• Eliminate the Dodd-Frank requirement for the Federal Deposit Insurance Corporation to gain prior congressional approval to provide emergency guarantees to debt issued by depository institutions or affiliates;
• Provide access to collateralized liquidity from the Federal Reserve to broker-dealers owned by regulated systemically important financial institutions and those susceptible to runs;
• Reform the Financial Stability Oversight Council to improve regulatory accountability and transparency; and
• Improve the regulation and supervision of nonbanks by properly accounting for the ways they are different from banks.

Founded in 2007, the Bipartisan Policy Center is a nonprofit organization that drives principled solutions through analysis, negotiation, and dialogue. BPC's Financial Regulatory Reform Initiative analyzes, assesses, and recommends ways to improve financial regulatory policy, including the effects of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. This report is the latest in a series of related white papers and recommendations.

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