Hester Peirce

Hester Peirce

  • Senior Research Fellow

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

Before joining Mercatus, Peirce served on Senator Richard Shelby’s staff on the Senate Committee on Banking, Housing, and Urban Affairs. In that position, she worked on financial regulatory reform following the financial crisis of 2008 as well as oversight of the regulatory implementation of the Dodd-Frank Act.

Peirce served at the Securities and Exchange Commission as a staff attorney and as counsel to Commissioner Paul S. Atkins. Before that, she clerked for Judge Roger B. Andewelt on the Court of Federal Claims and was an associate at a Washington, DC law firm.

She currently serves on the Investor Advisory Committee, which advises the Securities and Exchange Commission. Peirce’s work has been published in such outlets as the Hill and American Banker, and she is a regular contributor to Real Clear Markets. She is the editor of, and a contributor to, the book Dodd-Frank: What It Does and Why It’s Flawed, published by Mercatus in 2012.

Hester Peirce earned her BA in economics from Case Western Reserve University and her JD from Yale Law School.

Working Papers

Hester Peirce | May 01, 2014
American International Group, Inc. (AIG), a large insurance company, received a massive bailout during the financial crisis in response to difficulties centered on the company’s multifaceted exposure to residential mortgage-backed securities. The company is back on its feet, albeit in more streamlined form and with a new overseer—the Federal Reserve. This paper focuses on a piece of the AIG story that is rarely told—the role of the company’s securities-lending program in imperiling the company and some of its insurance subsidiaries. The paper argues that regulatory responses to AIG have been inapt. AIG did not need another regulator, but better risk management. The markets would have conveyed that message clearly had regulators not intervened to ensure AIG’s survival. This paper adds the missing piece to the AIG story in an effort to challenge the notion that more regulatory oversight for companies like AIG will prevent future crises.
Hester Peirce, Robert Greene | Apr 02, 2014
For decades, money market funds (MMFs) were thought to be safe, low-risk investments. The financial crisis of 2007–2009 cast MMFs in a new, less favorable light, which prompted calls for reform. Our paper offers a reform alternative that builds on MMF boards of directors and their well-established responsibility for making key decisions for MMFs. After a brief overview of the regulatory history of MMFs, we describe the responsibilities that boards have under current law, the problems MMFs encountered during the crisis, and market and government responses to these problems. Evidence shows that during the crisis, investors were discerning in deciding whether and when to run; more risky, less liquid funds experienced higher volumes of redemptions. This finding, along with our assessment of funds’ boards of directors’ responsibilities, helps to lay the groundwork for considering the various options for addressing problems still facing MMFs, including our proposal to allow boards to gate their funds when faced by potentially destabilizing redemption pressures.
Hester Peirce, Jerry Ellig | Mar 31, 2014
SEC Regulatory Analysis: “A Long Way to Go and a Short Time to Get There”…
Hester Peirce, Ian Robinson, Thomas Stratmann | Feb 27, 2014
This paper presents the results of the Mercatus Center’s Small Bank Survey, which include responses from approximately 200 banks across 41 states with less than $10 billion in assets each, serving mostly rural and small metropolitan markets.

Charts

Policy Briefs

Testimony & Comments

Hester Peirce | Jul 10, 2014
As the Federal Reserve celebrates one hundred years, reform efforts are timely. Consideration of fundamental questions about the Federal Reserve’s role in the regulatory landscape and in the markets should accompany those efforts.
Hester Peirce | May 21, 2014
The flaws in the Bureau’s design impair its ability to operate effectively for consumers. Although more fundamental reforms are needed, incremental reforms will help the Bureau to set appropriate priorities and seek relevant comments before acting. Making the agency more accountable, more transparent, and more focused will also make it more effective at ensuring that the financial system is serving the needs of consumers.
Hester Peirce | Dec 12, 2013
When the Dodd-Frank Act was being developed, one issue under consideration was whether the Board should lose some of its regulatory powers in view of its poor regulatory performance prior to the crisis. Instead, Dodd-Frank substantially increased the Board’s regulatory powers. One of the most important new powers is the authority to regulate nonbank financial institutions designated systemically important by the Financial Stability Oversight Council. So far, General Electric Capital Corporation, American International Group, and Prudential have been so designated, with additional entities likely to follow. These financial institutions will present the bank-focused Board with new regulatory challenges. It is important that the Board respond with well-vetted, tailored regulations that recognize that these entities are not banks and cannot be effectively regulated as if they were.
Hester Peirce | Dec 03, 2013
Chairman Schweikert, Ranking Member Clarke, and members of the Subcommittee, thank you for the opportunity to be part of today’s hearing on regulatory burdens on small financial institutions. In financial services, as in every other sector, the United States is not a one-size-fits-all nation. Financial institutions of all different sizes coexist, and customers choose among them based upon their needs. A regulatory environment that is increasingly unwelcoming to small financial institutions may curtail customer choice.

Expert Commentary

Aug 27, 2014

The Financial Stability Oversight Council is rumored to be on the verge of designating MetLife as a systemically important financial institution. Through the FSOC's bureaucratic eyes, designating MetLife may appear to be a safer course than leaving it undesignated and facing questions later if the company runs into trouble.
Aug 25, 2014

A gaggle of state and federal officials just announced a $16.7 billion settlement with Bank of America. The federal government and participating states will take part of that hefty sum, and the rest will go to select underwater homeowners and nonprofits. This record-breaking settlement stems from the crisis-era mortgage activities by Bank of America and the two companies it probably now wishes it had not acquired, Countrywide and Merrill Lynch.
Aug 13, 2014

Last week's rejection of 11 large financial institutions' living wills was a dramatic gesture by the Federal Deposit Insurance Corporation and the Federal Reserve. The living wills are supposed to be a roadmap for the orderly resolution of these companies, should they run into trouble. Living wills make good sense, but until markets are forced to live by them, there is little incentive to get them right.
Jul 30, 2014

Dodd-Frank's fourth birthday party was marred by talk of its long list of inadequacies. It is unfortunate to have to add the statute's regressive effects to that list. But regulators can do a lot before the law's next birthday to remove uneconomic regulatory impediments to the financial industry's ability to serve the full range of consumers and businesses.

Contact

Hester Peirce

Books

Podcasts

Hester Peirce | February 06, 2014
Hester Pierce Discusses Dodd Frank on the Gary Rathbun Show…
' '