This Is the End


Markets, Risk and Human Interaction

October 5, 2007

Systemic Risk -- My Testimony before the House Financial Services Committee

I testified before the House Financial Services Committee on Tuesday in a hearing on "Systemic Risk: Examining Regulators Ability to Respond to Threats to the Financial System". In my written testimony I provided my views on specific questions they had posed in their invitation.

One of the points I made in my testimony was the idea of the government taking on a role as a liquidity provider of last resort. This is something I addressed in my September 10th post, "Bailouts for Profit", and it was also a central point brought up in the testimony of another member of the panel, Professor Steven Schwarcz of Duke University. I had considered this a radical idea, but it was a dominant focus from the members of the committee during the two hours of questions.


  1. The idea was also mulled by Willem Buiter (, though his focus is on the UK.

  2. Was your testimony followed by any intelligent questioning? It seems clear to me that the regulators are falling farther and farther behind the practitioners. As a private investor, I find this very scary, so I'd like to know if there's any reason to think the regulators might be wising up.

  3. Regarding the level of the questions from the members of congress, the full testimony with the questions and answers is public record; it will be available on line at some point so you will be able to read it and judge for yourself. The congressional staff members that I worked with and those whom I met at the hearing are experienced and very knowledgeable.

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