Financial Markets Working Group

The Financial Markets Working Group is a collection of seventeen university-based scholars with expertise across a wide range of economic issues relevant to the recent economic crisis. Drawing on Mercatus’s long-standing expertise in economic and regulatory analysis, members of the Financial Markets Working Group conduct research that addresses the causes and potential solutions to the economic downturn to offer productive ideas to address the serious problems in financial markets and encourage a sustainable economic recovery.

Research

How to Fix Our Broken Proxy Advisory System James K. Glassman, J. W. Verret \| Apr 16, 2013 A rule enacted by the Securities and Exchange Commission in 2003 required institutions to adopt and disclose policies for proxy voting that were intended to minimize conflicts between the institutions’ interests and those of their shareholders. An SEC staff interpretation of that rule led to a result almost the opposite of the ruling’s intent. Institutions could easily protect themselves from legal liability by shifting responsibility to proxy advisory firms, which acquired increasing power over corporate governance, to the detriment of shareholders.	The Federal Reserve's Expanding Regulatory Umbrella Hester Peirce, Robert Greene \| Apr 03, 2013 The Federal Reserve’s performance as a regulator in the years leading up to the 2007–08 crisis earned it widespread criticism. In the wake of the crisis, its fate as a regulator was uncertain as Congress considered regulatory reforms. Some reform proposals would have substantially diminished the Federal Reserve’s regulatory role, but the financial reform ultimately signed into law in July 2010—Dodd- Frank—instead increased the Federal Reserve’s regulatory power.
Evaluating the Centralized-Layers Approach to U.S. Federal Financial Regulation David VanHoose \| Apr 02, 2013 This paper draws on the literature that applies economic analysis of regulation to evaluate Dodd-Frank’s centralized-layers financial regulatory structure, which continues a shift toward greater horizontal consolidation of regulation at the federal level but now also vertically integrates US financial regulation within the FSOC.	An Introduction to U.S. Monetary Policy Steven Horwitz \| Apr 02, 2013 This study examines the history and operation of the Federal Reserve System. It explores the Fed’s origins in American economic history and emphasizes the political compromises that produced it.
Resolving Too-Big-To-Fail Banks in the United States James R. Barth, Apanard Prabha \| Mar 07, 2013 Banks have failed throughout US history. The worst years for such failures were during the Great Depression: roughly 9,000 of about 25,000 banks failed, with nearly half of the failures occurring in 1933 alone. Depositors everywhere became concerned that their banks were on the verge of insolvency, and they rushed to withdraw their funds. This forced banks to sell off their assets at fire sale prices, thereby turning illiquidity problems into insolvency problems throughout the banking industry. The result was a major disruption in the payments system and a severe tightening of available credit, with a devastating impact on economic activity.	The Economic Situation, March 2013 Bruce Yandle \| Mar 01, 2013 There was only one lane open as I made my trip to Atlanta; the other three were blocked with those unhappy yellow and black make-believe barrels used by the highway folks. Traffic flow was constrained by efforts to repair potholes and broken pavement. We in the slow lane had little choice in the matter. Instead of 70, we were slowed to 20 miles per hour. We had to accept our fate, or find another route at the next exit.

More Research

Testimony & Comments

Financial Market Utilities Hester Peirce \| May 06, 2013 The proposed rules would implement sections 806(a) and (c) of Dodd-Frank, which allow the Board to authorize Reserve Banks to establish and maintain accounts for, provide certain services to,[1] and pay interest on balances maintained by or on behalf of financial market utilities (FMUs) that are designated by the Financial Stability Oversight Council (FSOC) as systemically important or likely to become systemically important.	Building a Sustainable Housing Finance System: Examining Regulatory Impediments to Private Investment Capital Arnold Kling \| Apr 24, 2013 I do not believe that the 30-year fixed-rate mortgage can be issued in large volume without taxpay- ers becoming liable for interest-rate risk. Conversely, if we reform the housing system so that the private sector truly bears the risk, then borrowers would encounter a large differential between the cost of a 30-year fixed-rate mortgage and the cost of a loan with an interest rate that is fixed for only 5 years. Borrowers should be making their choices based on this true cost differential.
Fractional Reserve Banking Lawrence H. White \| Jun 28, 2012 Chairman Paul and members of the subcommittee: Thank you for the opportunity to discuss the fractional- reserve character of modern banking, its positives and negatives, its relationship to financial instability, and to offer my thoughts on how to promote greater banking stability. I will begin by describing the historical origins of fractional-reserve banking (hereafter FRB), then move on to the effect of FRB on the money supply process, its connection to bank runs and financial instability, and finally the reforms needed to improve our banking system.	What the Euro Crisis Means for Taxpayers and the U.S. Economy Anthony B. Sanders \| Dec 15, 2011 Anthony Sanders testified before the U.S. House Committee on Oversight and Government Reform Subcommittee on TARP, Financial Services and Bailouts of Public and Private Programs on the role of the U.S. in addressing the European debt crisis.
Helping Homeowners Harmed by Foreclosures: Ensuring Accountability and Transparency in Appeals Anthony B. Sanders \| Dec 13, 2011 Anthony B. Sanders testified before the Senate Committee on Banking, Housing, and Urban Affairs - Subcommittee on Housing, Transportation, and Community Development about transparency and accountability in foreclosure appeals.	Housing Finance Reform: Continuation of the 30-Year Fixed-Rate Mortgage Anthony B. Sanders \| Oct 20, 2011 Anthony Sanders testified before the Senate Committee on Banking, Housing, and Urban Affairs about 30-year fixed rate mortgages.

More Testimony & Comments

Charts

U.S. Manufacturing: Output vs. Jobs Since 1975

Veronique de Rugy | Jan 24, 2011

This week, Veronique de Rugy examines changes in employment and productivity in the American manufacturing sector.

Experts

Lawrence J. White

Member, Financial Markets Working Group

Arthur E. Imperatore Professor of Economics at New York University's Stern School of Business

Deputy Chair of the Economics Department at New York University's Stern School of Business

Lawrence J. White is a member of the Financial Markets Working Group at the Mercatus Center at George Mason University. His primary research interests include financial regulation, antitrust, network industries, international banking, and applied microeconomics.

Garett Jones

Mercatus Center Senior Scholar

BB&T Professor for the Study of Capitalism, Mercatus Center

Associate Professor of Economics, George Mason University

Garett Jones is a senior scholar at the Mercatus Center at George Mason University. His primary research interests include macroeconomics, monetary economics, and the microfoundations of economic growth.

Anthony B. Sanders

Mercatus Center Senior Scholar

Distinguished Professor of Real Estate Finance

Member, Financial Markets Working Group

Anthony B. Sanders is a senior scholar at the Mercatus Center and the Distinguished Professor of Real Estate Finance at the School of Management at George Mason University. His primary research interests include financial institutions and capital markets with particular emphasis on real estate finance and investment.

James Broughel

Program Manager, Regulatory Studies Program

James Broughel is a program manager of the Regulatory Studies Program at the Mercatus Center. Mr. Broughel is a doctorate student in the economics program at George Mason University. He earned his MA in economics from Hunter College of the City University of New York.

Donald J. Boudreaux

Martha and Nelson Getchell Chair for the Study of Free Market Capitalism

Senior Education Advisor

Professor of Economics, George Mason University

Donald J. Boudreaux is a professor of economics at George Mason University.

Steven Horwitz

Affiliated Senior Scholar

Charles A. Dana Professor of Economics, St. Lawrence University

Steven Horwitz is a Mercatus Center Affiliated Senior Scholar, the Charles A. Dana Professor of Economics and department chair at St. Lawrence University in Canton, NY. He completed his MA and PhD in economics at George Mason University and received his A.B. in economics and philosophy from The University of Michigan.

Todd Zywicki

Mercatus Center Senior Scholar

GMU Foundation Professor of Law, George Mason University School of Law

Senior Fellow at the F. A. Hayek Program for Advanced Study in Philosophy, Politics and Economics

Todd Zywicki is a senior scholar at the Mercatus Center and a George Mason University Foundation Professor of Law at George Mason University School of Law. His primary research interests are consumer credit regulation, bankruptcy, credit cards, and mortgages.

Bruce Yandle

Mercatus Center Distinguished Adjunct Professor of Economics

Dean Emeritus, Clemson College of Business and Behavioral Sciences

Bruce Yandle is a distinguished adjunct professor of economics with the Mercatus Center at George Mason University. His primary research interests are public choice, regulation, and free market environmentalism. He is dean emeritus of the Clemson College of Business and Behavioral Sciences.

Veronique de Rugy

Senior Research Fellow

Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University. Her primary research interests include the federal budget, homeland security, taxation, tax competition, and financial privacy issues.

Tyler Cowen

General Director

Professor of Economics, George Mason University

Tyler Cowen is the general director at the Mercatus Center and the Holbert C. Harris Professor of Economics at George Mason University.

Jerry Ellig

Senior Research Fellow

Jerry Ellig is a senior research fellow at the Mercatus Center at George Mason University. His primary research interests include the federal regulatory process, economic regulation, and telecommunications regulation.

J. W. Verret

Member, Financial Markets Working Group

Senior Scholar

Assistant Professor, George Mason University School of Law

J.W. Verret is a member of the Financial Markets Working Group at the Mercatus Center and an assistant professor at George Mason University School of Law. His primary research interests are corporate governance, securities regulation, and executive compensation.

Lawrence H. White

Member, Financial Markets Working Group

Professor of Economics, George Mason University

Senior Scholar at the Mercatus Center

Senior Fellow at the F. A. Hayek Program for Advanced Study in Philosophy, Politics and Economics

Lawrence H. White is a professor of economics at George Mason University. His primary research interests include monetary theory and policy, history of banking and financial institutions, and central banking.

Arnold Kling

Mercatus Center Affiliated Senior Scholar

Member, Financial Markets Working Group

Former Economist, Federal Reserve and Freddie Mac

Arnold Kling is an affiliated senior scholar at the Mercatus Center at George Mason University where he is also a member of the Financial Markets Working Group. He draws on his experience at Freddie Mac and the Federal Reserve to increase understanding of monetary policy, the regulation “anomaly,” and the inside workings of America's federal financial institutions.

Robert E. Raffety

Associate Director for Policy Research

Adjunct Professor, George Mason University School of Law and Department of International and Public Affairs

Rob Raffety is associate director of the Regulatory Studies Program and the Government Accountability Project at the Mercatus Center at George Mason University.

Hester Peirce

Senior Research Fellow

Hester Peirce is a senior research fellow at the Mercatus Center at George Mason University. Peirce's primary research interests relate to the regulation of the financial markets.

Videos

Anthony Sanders Discusses The Low Down on Fannie's Loans on CNBC

Anthony B. Sanders | March 13, 2013

Anthony Sanders Discusses The Low Down on Fannie's Loans on CNBC…

Podcasts

Epstein on the Constitution

Russell Roberts, http://www.econtalk.org/archives/2013/05/epstein_on_the_1.html | May 20, 2013

Richard Epstein of New York University and Stanford University's Hoover Institution talks with EconTalk host Russ Roberts about the U.S. Constitution. Topics covered in this wide-ranging conversation include how the interpretation of the Constitution has changed over time, the relationship between state and federal power, judicial activism, the increasing importance of administrative agencies' regulatory power, and political influences on the Supreme Court.

Download the MP3

Recent Events

Destination Unknown: The Future of GSEs In America

Anthony B. Sanders, Arnold Kling, Lawrence J. White | May 02, 2012

Please join Mercatus Center financial services experts Anthony Sanders, Arnold Kling, and Larry J. White in discussing the future of GSEs, Fannie Mae and Freddie Mac, and the government's role in the U.S. housing market.

More Recent Events

Books

Dodd-Frank: What It Does and Why It's Flawed

| Jan 08, 2013

More than 360,000 words in length, the Dodd-Frank Wall Street Reform and Consumer Protection Act is the longest and most complex piece of financial legislation in American history. The nature and magnitude of its effects, both intended and unintended, will become clearer as regulators exercise the broad discretion given to them under the law.

More Books

How to Fix Our Broken Proxy Advisory System James K. Glassman, J. W. Verret \| Apr 16, 2013 A rule enacted by the Securities and Exchange Commission in 2003 required institutions to adopt and disclose policies for proxy voting that were intended to minimize conflicts between the institutions’ interests and those of their shareholders. An SEC staff interpretation of that rule led to a result almost the opposite of the ruling’s intent. Institutions could easily protect themselves from legal liability by shifting responsibility to proxy advisory firms, which acquired increasing power over corporate governance, to the detriment of shareholders.	The Federal Reserve's Expanding Regulatory Umbrella Hester Peirce, Robert Greene \| Apr 03, 2013 The Federal Reserve’s performance as a regulator in the years leading up to the 2007–08 crisis earned it widespread criticism. In the wake of the crisis, its fate as a regulator was uncertain as Congress considered regulatory reforms. Some reform proposals would have substantially diminished the Federal Reserve’s regulatory role, but the financial reform ultimately signed into law in July 2010—Dodd- Frank—instead increased the Federal Reserve’s regulatory power.
Evaluating the Centralized-Layers Approach to U.S. Federal Financial Regulation David VanHoose \| Apr 02, 2013 This paper draws on the literature that applies economic analysis of regulation to evaluate Dodd-Frank’s centralized-layers financial regulatory structure, which continues a shift toward greater horizontal consolidation of regulation at the federal level but now also vertically integrates US financial regulation within the FSOC.	An Introduction to U.S. Monetary Policy Steven Horwitz \| Apr 02, 2013 This study examines the history and operation of the Federal Reserve System. It explores the Fed’s origins in American economic history and emphasizes the political compromises that produced it.
Resolving Too-Big-To-Fail Banks in the United States James R. Barth, Apanard Prabha \| Mar 07, 2013 Banks have failed throughout US history. The worst years for such failures were during the Great Depression: roughly 9,000 of about 25,000 banks failed, with nearly half of the failures occurring in 1933 alone. Depositors everywhere became concerned that their banks were on the verge of insolvency, and they rushed to withdraw their funds. This forced banks to sell off their assets at fire sale prices, thereby turning illiquidity problems into insolvency problems throughout the banking industry. The result was a major disruption in the payments system and a severe tightening of available credit, with a devastating impact on economic activity.	The Economic Situation, March 2013 Bruce Yandle \| Mar 01, 2013 There was only one lane open as I made my trip to Atlanta; the other three were blocked with those unhappy yellow and black make-believe barrels used by the highway folks. Traffic flow was constrained by efforts to repair potholes and broken pavement. We in the slow lane had little choice in the matter. Instead of 70, we were slowed to 20 miles per hour. We had to accept our fate, or find another route at the next exit.

Financial Market Utilities Hester Peirce \| May 06, 2013 The proposed rules would implement sections 806(a) and (c) of Dodd-Frank, which allow the Board to authorize Reserve Banks to establish and maintain accounts for, provide certain services to,[1] and pay interest on balances maintained by or on behalf of financial market utilities (FMUs) that are designated by the Financial Stability Oversight Council (FSOC) as systemically important or likely to become systemically important.	Building a Sustainable Housing Finance System: Examining Regulatory Impediments to Private Investment Capital Arnold Kling \| Apr 24, 2013 I do not believe that the 30-year fixed-rate mortgage can be issued in large volume without taxpay- ers becoming liable for interest-rate risk. Conversely, if we reform the housing system so that the private sector truly bears the risk, then borrowers would encounter a large differential between the cost of a 30-year fixed-rate mortgage and the cost of a loan with an interest rate that is fixed for only 5 years. Borrowers should be making their choices based on this true cost differential.
Fractional Reserve Banking Lawrence H. White \| Jun 28, 2012 Chairman Paul and members of the subcommittee: Thank you for the opportunity to discuss the fractional- reserve character of modern banking, its positives and negatives, its relationship to financial instability, and to offer my thoughts on how to promote greater banking stability. I will begin by describing the historical origins of fractional-reserve banking (hereafter FRB), then move on to the effect of FRB on the money supply process, its connection to bank runs and financial instability, and finally the reforms needed to improve our banking system.	What the Euro Crisis Means for Taxpayers and the U.S. Economy Anthony B. Sanders \| Dec 15, 2011 Anthony Sanders testified before the U.S. House Committee on Oversight and Government Reform Subcommittee on TARP, Financial Services and Bailouts of Public and Private Programs on the role of the U.S. in addressing the European debt crisis.
Helping Homeowners Harmed by Foreclosures: Ensuring Accountability and Transparency in Appeals Anthony B. Sanders \| Dec 13, 2011 Anthony B. Sanders testified before the Senate Committee on Banking, Housing, and Urban Affairs - Subcommittee on Housing, Transportation, and Community Development about transparency and accountability in foreclosure appeals.	Housing Finance Reform: Continuation of the 30-Year Fixed-Rate Mortgage Anthony B. Sanders \| Oct 20, 2011 Anthony Sanders testified before the Senate Committee on Banking, Housing, and Urban Affairs about 30-year fixed rate mortgages.