This policy brief examines issues associated with the design and implementation of regulatory policymaking in interconnected financial markets. The policy brief explains why international interdependence among nations’ financial markets and regulations can provide an incentive for national...

Since the 1930s, when the U.S. Congress interposed government regulation of banks for market discipline, the role of the state in the American financial system has steadily grown. While politicians and executives from the financial services industry characterize the relationship as a...

The keen interest of the media, and by extension, the public, in the future of house price growth in the United States centers on the question of whether there is a house price bubble nationally or regionally. Even among those who concede that a bubble per se may not be present, many worry that...

This policy brief assesses the implications of Basel II for bank regulatory compliance costs. In spite of widespread complaints by bankers about the costs of complying with Basel II rules, the academic literature has given surprisingly little attention to quantifying these costs. The brief...

The portfolios of mortgages and mortgage-backed securities held by Fannie Mae and Freddie Mac have now become the central issue in the legislative battle over improvements in their regulation. But it was not always so. When the notion of improving their regulation was first advanced in 2000, the...

This policy brief reviews recent studies that have sought to apply analysis of network externalities and the theory of two-sided markets to card payment networks, and it evaluates the public policy implications of this body of work. Three general conclusions emerge from the bulk of the research...

Despite the considerable media attention given to the collapse of the market for complex structured assets that contain subprime mortgages, there has been too little discussion of why this crisis occurred. "The Subprime Crisis: Cause, Effect and Consequences" argues that three basic issues are...

This paper discusses and critically appraises recent developments in the definition, measurement, and regulation of systemic risks. Although the issue of systemic risks has been subjected to considerable study, there is not widespread agreement on how to define this concept. Initial efforts to...

The application of U.S. antitrust policy toward mergers in the banking industry is based on past research suggesting that there is a trade-off between adverse effects on consumer welfare owing to potentially augmented market power and possible welfare-improving effects arising from efficiency...

The causes of the financial crisis of 2007-09 are many and varied. Indeed, the crisis may be viewed as the product of a perfect storm. This paper identifies the major culprits or sinners of the U.S. crisis and enumerates their more important sins. The culprits include central bankers, commercial...