Abstract :
The SquamLakeReport(SLR)containsahostofrecommendationsto‘‘fixthefinancial
sector.’’Acrediblefixmusttakeontheexcessiverisk-takingoffinancialinstitutions
createdwhenuninsuredcreditorsofimportantfinancialinstitutionsexpectgovernment
protectionfromloss(i.e.,thetoo-big-to-failproblem).ThevastmajorityofSLR’s
recommendationsconstituteimportantcontributionstoaddressingTBTF;theanalysis
offered insupportofrecommendationsissoundandbringsmoderneconomicsand
financetobear.TheclarityandfocusofSLRoffersamodelforacademicswritingfor
a policyaudience.
We differinemphasiswithSLRonafewissues,includingcapitalandlivingwills,but
supportmovingforwardwiththecoreofSLR’srecommendationseveninthesecases.
Legislation(i.e.,‘‘Dodd–Frank’’)seekingtofixthefinancialsectorbecamelaw
around thetimeSLRwaspublished.Thelegislationincludesinoneformoranother
the predominanceofcrediblerecommendationsmadetoaddressTBTF,includingthe
majorityofthoseinSLR.Theultimatesuccessofthelegislation,however,dependson
implementation.Wehopethegovernmentfocusesonamacroprudentialregimethat
reducesfalloutfromfinancialspillovers,considersneweffortstomeasureandtax
expectedTBTFsubsidies,andreconsidersaspectsofDodd–Frankthatexpandthesafety
net. Giventhestakes,anotherSLR-calibereffort,thistimecenteredonDodd–Frank
implementation,promiseshighreturns
