Paul H. Kupiec is a resident scholar at the American Enterprise Institute (AEI), where he studies systemic risk and the management and regulations of banks and financial markets. He also follows the work of financial regulators such as the Federal Reserve and examines the impact of financial regulations on the US economy.
Before joining AEI, Kupiec was an associate director of the Division of Insurance and Research within the Center for Financial Research at the Federal Deposit Insurance Corporation (FDIC), where he oversaw research on bank risk measurement and the development of regulatory policies such as Basel III. Kupiec was also director of the Center for Financial Research at the FDIC and chairman of the Research Task Force of the Basel Committee on Banking Supervision. He has previously worked at the International Monetary Fund (IMF), Freddie Mac, J.P. Morgan, and for the Division of Research and Statistics at the Board of Governors of the Federal Reserve System.
Kupiec has edited many professional journals, including the Journal of Financial Services Research, Journal of Risk, and Journal of Investment Management.
He has a bachelor of science degree in economics from George Washington University and a doctorate in economics — with a specialization in finance, theory, and econometrics — from the University of Pennsylvania.
Chairman, Research Task Force, Basel Committee on Bank Supervision, 2010–13
Director, Center for Financial Research, FDIC
Associate Director, Division of Insurance and Research, Center for Financial Research, FDIC, 2004–13
Deputy Chief, Division of Banking Supervision and Regulation, Department of Monetary and Financial Systems, IMF, 2000–04
At Monday's FSOC meeting, council members said that they would review and work to improve the designation process. One key area for improvement is that the council must provide well-reasoned justifications as to why it chooses to designate a firm as systemically important. The FSOC has thus far demonstrated an inability to provide a convincing answer to this basic question.
The financial crisis has changed the mechanics of monetary policy. When economic growth improves to the point that the Federal Reserve finally decides to increase short-term interest rates, it will need a new approach to do so.
The power of bank living wills lies beyond what's written down on paper. Living wills are a gateway for regulators to change the company itself. If companies' living wills are not to regulators' liking, regulators can require the institutions to restructure, raise capital, reduce leverage, divest or downsize.
History shows that the FDIC cannot efficiently resolve a large bank unless it sells the bank to a larger healthy institution. Whole-bank purchase resolutions are what created many of today's "too-big-to-fail" institutions. The best use of annual Orderly Resolution Plans is to require the FDIC to plan for an efficient break-up of the largest banks in the FDIC bank resolution process.
The Dodd-Frank Act has failed to achieve its stated goals. Instead, evidence suggests that Dodd-Frank has reinforced investor’s perceptions that the largest financial institutions enjoy an extended government safety net. Rather than ending too-big-to-fail, Dodd-Frank’s provisions create new uncertainties around the resolution process for large financial institutions.
Resident Scholar Paul Kupiec, Resident Fellow Alex Pollock, and Arthur F. Burns Fellow in Financial Policy Studies Peter Wallison speak on a panel for an American Enterprise Institute conference call about the four year anniversary of the Dodd-Frank Act.
The Dodd-Frank Act (DFA) uses the phrase “systemic risk” 39 times without defining it. Because the term is ambiguous, the law allows the regulatory agencies wide discretion. The DFA directs agencies to draft and implement rules to control and minimize “systemic risk” without requiring the agencies to identify specifically what they are attempting to control or minimize.