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U.S. SHADOW FINANCIAL REGULATORY COMMITTEE
2001 Annual Report
Administrative Office
c/o Professor George G. Kaufman
Loyola University Chicago
820 N. Michigan Avenue
Chicago, Illinois 60611
312-915-7075
In 2001, the U.S. Shadow Financial Regulatory Committee completed its sixteenth year of operation. As in most of its previous years, the Committee was scheduled to meet quarterly. However, the September meeting was cancelled because of 9/11. It issued seven policy statements. The Committee experienced one change in membership during the year. Richard Aspinwall, a charter member of the Committee, resigned in February and Roberta Romano resigned in December. (Current and past members of the Committee are listed in Appendix A.)
In addition, the Committee met jointly with the European, Japanese, and Latin American Shadow Committees in Amsterdam, the Netherlands on June 16-18, 2001 and issued a joint statement. The four committees operate independently, but keep each other informed of their activities and meet jointly once a year. The membership and statements of all the committees are posted on the U.S. Committee’s website.
Meetings
As usual, the Committee meetings lasted two days -- all day Sunday and on Monday mornings. The 2001 meeting dates were on Sunday-Monday, February 25-26, May 6-7, and December 2-3. All meetings were at the offices of the American Enterprise Institute in Washington, D.C.
At its February meeting, the Committee discussed the latest Basel proposal for bank capital requirements, the Fed-Treasury study on subordinated debt for banks, national charters for insurance companies, and pending legislation on financial derivatives. At its May meeting, the Committee discussed federal chartering for insurance companies, risk-exposure by the housing GSEs, the evolving role of the Federal Home Loan Banks, accounting for bank loan losses, and public disclosure recommendations for big banks by the Basel Committee. As noted earlier, the scheduled September meeting was cancelled. In December, the Committee discussed predatory lending, proposed terrorism insurance legislation, the ongoing implications of the Gram-Leach-Bliley Act, the Argentina financial crisis, and the SEC’s Fair Disclosure Regulation. At the meetings, the Committee followed its usual practice of devoting part of the session to meetings with guests. Guests are usually representatives of policy-makers, regulatory agencies, financial services firms, and trade associations. These meetings are private, closed-door exchanges of ideas on issues of current concern to both parties. The meetings ended with press conferences at which its policy statements were released.
Policy Statements
The Committee continues to serve as a major independent public watchdog for monitoring and evaluating events affecting the efficiency and safety of the financial services industry. The primary means of disseminating its views on these issues is through policy statements adopted at its meetings after thorough discussion. A listing of all policy statements since its establishment in 1986 appears in Appendix B. Through 2001, the Committee has issued 174 policy statements.
The seven policy statements issued by the U.S. Committee in 2001 covered a wide range of subjects. The Committee continued to be critical on net of the Basel in place and proposed bank capital requirements, the reluctance of both Basel and the Federal Reserve to incorporate subordinated debt in their capital requirements for banks to enhance the role of market discipline, and the slow pace of expanded activities since enactment of GLB. It also recommended improvements in the regulation on predatory lending and on enactment of federal terrorism insurance.
In June, representatives of the European, Japanese, Latin American and U.S. Shadow Committees met in Amsterdam and issued their third joint policy statement "Reforming Bank Capital Regulation."
Dissemination and Public Service
The Committee seeks both to raise the level of debate on public policy affecting the financial services industry and to improve public policy itself largely through its policy statements and the underlying analytical reasoning. The policy statements are released at a press conference immediately following most quarterly meetings. The press conferences, which are attended by Committee members, serve two purposes. One, they provide the representatives of the media with an opportunity to obtain additional information about the statements, including background information and the underlying reasons through both an introductory briefing and asking questions directly of Committee members. Two, the conferences provide the Committee with an opportunity to educate the press on the underlying economics arguments for each statement and to assist them in formulating appropriate questions. The policy statements and the press conferences receive regular coverage in financial trade publications, such as the daily American Banker and the daily and weekly BNA Banking Reports, and occasional coverage in major national daily and weekly publications, such as the Wall Street Journal and Washington Post. In addition, segments of the press conferences and interviews with Committee members at the conferences have in the past been broadcast on a number of TV and radio stations, including CSPAN, PBS, CNBC and CNN. A press conference also followed the joint meeting of the four Shadow Committees in Amsterdam and a public symposium sponsored by the Committees.
The policy statements are delivered the same day to the appropriate policy-makers, regulatory agencies, and other interested parties. To the extent that the statements pertain to specific issues and proposed regulations on which agencies have requested public comment, they are submitted to the agency. The new as well as all Committee statements along with other information about the Committee are available on the AEI’s website shortly after the press conference. The policy statements are also sent to designated members of the media that do not attend the press conference, policy-makers, regulators, and members of the general public that request to be on the mailing list. In addition, a large number of requests for policy statements and other information were made by telephone and letter through the Committee’s administrative office at Loyola University.
The other three Shadow Financial Regulatory Committees also met throughout the year and released a number of policy statements focusing on financial regulatory safety and efficiency issues in their geographic areas. These statements are available on the U.S. Shadow Committee AEI website.
Plans for 2002
The Committee will meet quarterly in 2002 on Sunday-Monday February 24-25, May 5-6, September 22-23, and December 1-2. The major focus of the Committee is likely to be on both continuing the drive for efficient bank capital regulation and continuing the deregulation of financial markets without destabilizing the system.
The third joint meeting of the four Shadow Committees is tentatively scheduled for the U.S. in the fall of 2002. It will again be in conjunction with a public conference on banking and financial markets issues.
Administrative and Financial
The Committee is a tax-exempt 501(c)(3) nonprofit organization. The Committee's administrative office is at Loyola University Chicago. Beginning in 1999, the Committee has been financially supported entirely by the American Enterprise Institute and has held all of its meetings there, but retains its policy independence.
Appendix A: Statement of Purpose and Membership
The Shadow Financial Regulatory Committee is a group of independent experts on the financial services industry and its regulatory structure.
The purpose of the Committee are: (1) to identify and analyze developing trends and ongoing events that promise to affect the efficiency and safe operation of sectors of the financial services industry, (2) to explore the spectrum of short- and long-term implications of emerging problems and policy changes, (3) to help develop appropriate private, regulatory and legislative responses to such problems, and (4) to assess and respond to proposed and actual public policy initiatives with respect to their impact on the public interest.
The results of the Committee's deliberations are intended to increase the awareness and sensitivity of members of the financial services industry, public policy markets, the communications media and the general public to the importance and implications of current problems, events and policy initiatives affecting the industry.
Members of the Shadow Financial Regulatory Committee are drawn from academic institutions and private organizations and reflect a wide range of views. The Committee is independent of any of the members' affiliated institutions or of sponsoring organizations. The recommendations of the Committee are its own. The only common denominators of the members are their public recognition as experts on the industry and their preferences for market solutions to problems and the minimum degree of government regulation consistent with efficiency and safety.
Past and Present Members (1986-2001)
George G. Kaufman, (1986-) | Loyola University Chicago |
Appendix B: Policy Statements
1. The Baker Plan and LDC Lending, Feb. 15, 1986 |
