Making Failure Feasible Proposes Bold New Monetary Reforms

Wednesday, October 7, 2015
Making Failure Feasible Proposes Bold New Monetary Reforms

The Hoover Institution Press released Making Failure Feasible, which challenges current US banking policy and proposes bold monetary reforms, including adding a new Chapter 14 to the U.S. Bankruptcy Code. 

The ideas presented are the result of the Hoover Institution’s Resolution Project composed of a group of distinguished economists and scholars, including George Shultz, John Taylor, Thomas Jackson, and Kenneth Scott.

Making Failure Feasible Proposes Bold New Monetary Reforms
Making Failure Feasible Proposes Bold New Monetary Reforms by John B. Taylor, Thomas H. Jackson, Kenneth E. Scott

“A key component of regulatory reform is making banks resolvable. Making banks ‘safe to fail’ means that they can fail and be resolved at no cost to the taxpayers and without major disruption to the economy or financial markets,” said co-author and Hoover Institution senior fellow John Taylor.  “We hope that this book can be used as a resource in crafting meaningful monetary policies that make this possible.”

Making Failure Feasible focuses on alternative methods of dealing with failing financial institutions, and builds on the Resolution Project’s previous work to improve the prospect that our largest financial institutions—particularly with pre-bankruptcy planning—could be successfully reorganized or liquidated pursuant to the rule of law.  The authors argue adding Chapter 14 to the Bankruptcy Code would lead to faster resolutions and clearer outcomes that would avoid depending on government intervention and better mesh with emerging ideas about cross-border resolution.

“A stable global financial system begins with sound monetary and economic policies,” said Thomas H. Jackson, professor and president emeritus from the University of Rochester. “Although this book serves as a critical starting point for exploration of such policies, we have only begun to find permanent and fruitful solutions. Further, Chapter 14-style reforms are needed to avoid future financial crises.”  

The remaining chapters provide the context for reform, outline the fundamental principles of reform, show how reform would work in practice, and show how Chapter 14, as envisioned in this book, would be a substantial advance on administrative-focused resolution procedures.

AUTHORS: John B. Taylor is the George P. Shultz Senior Fellow in Economics at the Hoover Institution, chairs the Hoover Working Group on Economic Policy, and is the Mary and Robert Raymond Professor of Economics at Stanford University. Thomas H. Jackson is a distinguished university professor and president emeritus from the University of Rochester. Formerly a professor at Stanford and Harvard Law Schools and dean at the University of Virginia School of Law, he is currently a member of the Resolution Project at the Hoover Institution’s Working Group on Economic Policy. Kenneth E. Scott, a Hoover Institution senior research fellow and the Ralph M. Parsons Professor Emeritus of Law and Business at Stanford Law School, chairs the Resolution Project at the Hoover Working Group on Economic Policy and is a leading scholar in the fields of corporate finance reform and corporate governance who has written extensively on federal banking regulation.

CONTRIBUTORS: George P. Shultz, Jacopo Carmassi, Darrell Duffie, Simon Gleeson, Richard J. Herring, Thomas F. Huertas, Emily C. Kapur, William F. Kroener III, and David Skeel

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About the Hoover Institution:  The Hoover Institution, Stanford University, is a public policy research center devoted to the advanced study of economics, politics, history, and political economy—both domestic and foreign—as well as international affairs. With its eminent scholars and world-renowned Library & Archives, the Hoover Institution seeks to improve the human condition by advancing ideas that promote economic opportunity and prosperity, and secure and safeguard peace for America and all mankind.

CONTACT INFORMATION:  Jenny Mayfield | Office of Public Affairs | Hoover Institution jennymayfield [at] | 650-723-0603