CAMBRIDGE WINTER CENTER for Financial Institutions Policy

CAMBRIDGE WINTER CENTER

for Financial Institutions Policy

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The Cambridge Winter Center is a non-profit, nonpartisan organization dedicated to fostering a rational and informed discourse on U.S. financial institutions policy.

Welcome to the Cambridge Winter Center

Copyright 2010 Cambridge Winter Incorporated. All rights reserved.

Program D
Re-Building U.S. Housing Finance
Creating a free market for mortgage risk and return

Program E
The Future of Community Banks
Finding systemic relevance in a consolidating market

Program F
Ethics in Financial Services
Setting the bar for ethical self-regulation in credit markets

The Failure of Bank Board Governance
Through even the most forgiving of lenses, bank boards of directors performed miserably during the credit bubble and ensuing crisis. The primary problem: large bank boards simply lack the industry experience to provide a substantive check on risk-hungry management teams.

Auto Race to the Bottom
The exemption of auto dealers from a new consumer protection regulator’s mandate was ill conceived. The exemption is both a step backwards for consumer protection, and deeply offensive to basic free market principles.

ILCs and Shadow Banking
The Administration has proposed ending the long-standing Industrial Loan Company loophole in the Bank Holding Company Act’s regulatory architecture. This Note summarizes the recent evolution of ILCs, examines the empirical connection of ILCs to the credit crisis, and highlights implications for policy-makers.

The Giants Fall
Fannie Mae and Freddie Mac’s central function, guarantying mortgage credit through government sponsored firms, is fatally flawed. The GSEs’ other systemic benefits could be more better delivered through other means. They should be eliminated.

Out of the Shadows
By focusing on the deregulation of banks, instead of managing the already growing systemic risk of the shadow banks, 1999’s GLBA enabled the financial crisis. It is not too late to bring shadow banking into the light.

The Killer G’s
The Dodd-Frank Act takes a sound approach to ending the too big to fail problem, with a few areas for tactical improvement. Policy-makers should recognize, though, that the power of the Act’s approach could be eroded by systematic regulatory capture or inattention.

Now More Absorbent!
The Basel Committee’s proposal on loss absorbency might give life to so-called “contingent capital” instruments. It should adopt five principles to cleanse the concept of the deep flaws of the traditional bank preferred market.

Capital, Capital, Capital?
The ultimate regulatory goal – an increase in capital without accompanying increase in risk – is only achieved with equal parts capital regulation, risk measurement, and properly-functioning markets.

Starting Over
Two opposing narratives have developed regarding Fannie Mae and Freddie Mac. Both miss the mark. A more sober assessment suggests a path forward.

GSE Decision Tree
A rough consensus may be emerging on the future of the GSEs. This analytical framework highlights the difference between that emerging perspective and Cambridge Winter’s proposal.

Matters of Size
Despite Dodd-Frank’s special benefits for community banks, none of them address small banks’ core structural challenge: they are increasingly confined to the most volatile corners of the credit markets.