Ending Government Bailouts as We Know Them

Ending Government Bailouts as We Know Them

Editors: Kenneth E. Scott, George P. Shultz, John B. Taylor
ISBN: 978-0-8179-1124-9
Publication Date: 3/15/2010
Pages: 338

HOW DO WE MAKE FAILURE TOLERABLE?

The American people are clearly upset about the massive government bailouts of faltering organizations and the consequent commitment of taxpayer dollars-as well as the heavy involvement of the federal government in private sector activities. How do we approach a problem of this magnitude? The key question, which George Shultz presents at the outset, is: How do we make failure tolerable? In other words, if clear and credible measures can be put into place that convince everybody that failure will be allowed, then the expectations of bailouts will recede and perhaps even disappear. Perhaps more important, we would also get rid of the risk-inducing behavior that even implicit government guarantees bring about. In Ending Government Bailouts as We Know Them, a team of expert contributors examine the dangers of continuing government bailouts and offer constructive alternatives designed to both resolve the current bailout problem and prevent future crises.

The other contributors follow up on Shultz's premise with discussions on a range of key topics. They begin with the nature of systemic risk-particularly in the experience of the Lehman Brothers bankruptcy-and the reforms that financial firms can implement, whether or not required by government regulatory agencies. They also explore in detail the two main alternatives to government bailouts in the case of a failing financial firm: bankruptcy versus resolution authority. The book concludes with a summary of the commentary on the chapters by formal discussants and the audience at the conference, ranging from constructive critiques to strong endorsements to ideas for future research.

Authors include George P. Shultz, Paul Volcker, Nicholas F. Brady, John B. Taylor, Kimberly Anne Summe, Darrell Duffie, Richard J. Herring, Joseph A. Grundfest, William F. Kroener III, Thomas M. Hoenig, Charles S. Morris, Kenneth Spong, Thomas H. Jackson, Kenneth E. Scott, and Johannes Stroebel.

With Commentary by Gary H. Stern, Monika Piazzesi, David Skeel, Peter J. Wallison and others.


ADVANCE PRAISE FOR ENDING GOVERNMENT BAILOUTS AS WE KNOW THEM

"An outstanding compilation of the best minds and best thinking on how not to waste the financial crisis."

- H. Rodgin Cohen, Chairman, Sullivan & Cromwell LLP

"No tax payer bailouts! No 'too big to fail'! How do we achieve that while recognizing that failures will occur as they are an indispensable element of our free enterprise system? The ideas presented in the book are important for policy makers and other interested parties to read, understand, and include as they consider changes to our regulatory policies and structure for financial institutions."

- Dick Kovacevich, Chairman emeritus and former chairman and CEO of Wells Fargo & Company

"Radical reform of our financial system is required. The 'too big to fail' problem is too important to ignore. This book, with contributions from some of our leading financial statesmen, explores the options."

- Mervyn King, Governor of the Bank of England


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George P. Shultz

George Pratt Shultz has had a distinguished career in government, academia, and the world of business. He is one of two individuals to have held four different federal cabinet posts; has taught at three of this country’s great universities; and for eight years was president of a major engineering and construction company. Shultz was sworn in on July 16, 1982, as the sixtieth US secretary of state, serving until January 20, 1989.

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John B. Taylor

John B. Taylor is the George P. Shultz Senior Fellow in Economics at the Hoover Institution and the Mary and Robert Raymond Professor of Economics at Stanford University. He chairs the Hoover Working Group on Economic Policy and is director of Stanford’s Introductory Economics Center.

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Kenneth E. Scott

Kenneth E. Scott is a senior research fellow and the Ralph M. Parsons Professor of Law and Business Emeritus, Stanford University Law School. He is an expert in public regulation of banking institutions, corporation law, and securities law. His current research focuses on legislative and policy developments related to bank regulation and deposit insurance reform. He is also exploring the application of new economic perspectives to corporate law and governance issues.

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