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The Squam Lake Report
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The Squam Lake Report

Fixing the Financial System

The Squam Lake Group
Princeton UP, 2010
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Editorial Rating

9

Qualities

  • Comprehensive
  • Innovative
  • For Beginners

Recommendation

This slim volume is named after the isolated New England resort where 15 renowned economists, academics and policy makers met in the fall of 2008 to devise solutions to the “World Financial Crisis.” That they convened amid fast-paced, seismic economic events adds to the star-chamber aspects of their collaboration. Still, these éminences grises – all nonpartisan, without commercial sponsorship or political axes to grind – developed their ideas by sharing their expertise. Their recommendations cover reforms in banking, financial products, regulation, compensation, pensions and hedge funds – all the named villains of the last crisis. Why did they issue these ideas? So they could educate political and fiscal leaders – if they would only listen – about possible laws that could help avert or lessen the likelihood and impact of future meltdowns. getAbstract recommends this sound advice to students of and participants in the global economy.

Summary

Squam Lake

Amid the raging economic storm of autumn 2008, 15 top economists assembled at tranquil Squam Lake, New Hampshire, to construct a series of recommendations. Their objective? To educate and assist politicians and policy makers on financial system reform. The 15 gurus especially wanted to mitigate the negative, “unintended consequences” that well-intentioned legislation often introduces.

Despite the rapid pace of events that fall, the economists focused on long-term issues and their solutions. They analyzed and concurred on nine major areas: banking regulation, financial transparency, pension reform, capital requirements, executive compensation, bank capitalization, moral hazard, and the “shadow banking system” of hedge funds, credit default swaps, brokerages and investment banks. They collaborated on reports, outlining their reasoning and conclusions on each topic. To insert their findings into “policy conversations in real time,” they subsequently conferred with members of the US Congress, the Federal Reserve, the European Central Bank, the Bank of England, the Banque de France and other global, high-level government institutions.

Two precepts underlie...

About the Author

The Squam Lake Group is a non-partisan, non-affiliated group of academics who offer guidance on the reform of financial regulation. Dartmouth Professor Kenneth R. French coordinated 15 contributors, including former, current and future American Finance Association presidents; an ex-Federal Reserve governor; a former IMF chief economist and several former Clinton and Bush Council of Economic Advisers members. They are: Kenneth R. French, Martin N. Baily, John Y. Campbell, John H. Cochrane, Douglas W. Diamond, Darrell Duffie, Anil K. Kashyap, Frederic S. Mishkin, Raghuram G. Rajan, David S. Scharfstein, Robert J. Shiller, Hyun Song Shin, Matthew J. Slaughter, Jeremy C. Stein and René M. Stulz.

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