• Jeremy Stein


2022, Book Chapter: "I will focus my remarks on the ongoing regulatory challenges associated with large, systemically important financial institutions, or SIFIs. In part, this focus amounts to asking a question that seems to be on everyone’s mind these days: Where do we stand with respect to fixing the problem of “too big to fail” (TBTF)? Are we making satisfactory progress, or it is time to think about further measures?  I should note at the outset that solving the TBTF problem has two distinct aspects. First, and most obvious, one goal is to get to the point where all market participants understand—with certainty—that if a large SIFI were to fail, then the losses would fall on its shareholders and creditors, and taxpayers would have no exposure. However, this is only a necessary condition for success, not a sufficient one. A second aim is that the failure of a SIFI must not impose significant spillovers on the rest of the financial system, in the form of contagion effects, fire sales, widespread credit crunches, and the like. Clearly, these two goals are closely related. If policy does a better job of mitigating spillovers, it becomes more credible to claim that a SIFI will be allowed to fail without government bailout."

Non-HKS Harvard Author Website - Jeremy Stein