Financial regulation should be countercyclical, strengthening during speculative booms to contain excessive leverage and loosening following crises so as to not limit credit extension in hard times. And yet, financial regulation in fact tends to be procyclical, strengthening following crises and...

This essay explores the new countercyclical capital buffer requirement that is a part of both the Basel III and Dodd-Frank rulemaking efforts following the financial crisis. The new buffer will require banks to hold higher levels of capital reserves during times that regulators determine capital...