PARTICIPANTS
George Shultz, John Taylor, Michael Boskin, Andrew Crockett, Joe Grundfest, John Gunn, Martin Schneider, Ken Scott, John Shoven, Johannes Stroebel, Anat Admati, Jeremy Bulow, Paul Fleiderer, Jacob Goldfield, Bob Hall, Chad Jones, Pete Klenow, Pablo Kurlat, Stefan Nagel, Dmetri Orlov, Stijn Van Nieuwerburgh, Laura Veldekamp
ISSUES DISCUSSED
Gary Gorton reviewed the history of financial crisis in the United States with the aim of drawing lessons for the future. He defined the Quiet Period between the financial crisis of 1934 and the financial crisis of 2007 and asked what is needed to return to the quiet period. He argued that the National Bank Acts and deposit insurance were effective, without the intervention of a central discretionary authority such as the Fed. Reviewing the recent reform legislation he argued that it raises many questions. “What are the criteria for a firm being declared ‘systemically important’? What does ‘systemically important’ mean? How would ‘orderly liquidation’ work? Is it even feasible during a systemic crisis?” He noted that the new framework “requires, indeed, depends on, discretion. The upshot of this is to make the future financial landscape very unpredictable…. This uncertainty would seem to undermine the very intentions of the legislation. We are in a very precarious spot.”
