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Thoughts on "The Squam Lake Report": Reengineering the Financial System to Better Withstand Extreme Volatility

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  • Kenneth A. Posner

Abstract

The most important contributions of "The Squam Lake Report" are its analysis and recommendations not for eliminating the possibility of future crises, but for enabling the financial system to better withstand the bouts of volatility that are a natural outcome of market forces. In this regard, the Report's most promising proposal is its prescription that systemically important financial firms issue "contingent capital" that converts from debt to equity when a financial firm's solvency is at risk. Copyright Copyright (c) 2010 Morgan Stanley.

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  • Kenneth A. Posner, 2010. "Thoughts on "The Squam Lake Report": Reengineering the Financial System to Better Withstand Extreme Volatility," Journal of Applied Corporate Finance, Morgan Stanley, vol. 22(3), pages 34-39.
  • Handle: RePEc:bla:jacrfn:v:22:y:2010:i:3:p:34-39
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    Cited by:

    1. Berg, Tobias & Kaserer, Christoph, 2015. "Does contingent capital induce excessive risk-taking?," Journal of Financial Intermediation, Elsevier, vol. 24(3), pages 356-385.
    2. Berg, Tobias & Kaserer, Christoph, 2011. "Convert-to-Surrender Bonds: A Proposal of How to Reduce Risk-Taking Incentives in the Banking System," Annual Conference 2011 (Frankfurt, Main): The Order of the World Economy - Lessons from the Crisis 48737, Verein für Socialpolitik / German Economic Association.

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