By John H. Cochrane
Regulation Winter 2009-2010

With the benefit of a year’s hindsight, we can now look on the financial crisis and determine what was really the central problem, as well as identify what are the most important policy changes needed to avoid repeating the crisis. In my view, the usual suspects — “global imbalances” of saving or imports and exports, the Fed’s low rates, a housing “bubble,” subprime mortgages, fancy derivatives — are not that important. Once we put all that aside, I think we can focus on the real problems and their solution.

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By Douglas Diamond and Anil K Kashyap
The New York Times, Op-ed

WALL STREET is considering legal action to prevent President Obama from imposing a new tax on bailed-out financial institutions. Because the law that created the Troubled Asset Relief Program compels the government to recoup the bailout money, it’s unlikely that banks will succeed in avoiding recompense. So rather than debate the constitutionality of the proposed tax, it is far more productive to design the best possible repayment plan.

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Professors Steven Kaplan, Tobias Moskowitz, and Luigi Zingales discuss the ethics and the role of ethics on Wall Street, in the past, the present, and going into the future.

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Myron Scholes Forum, December 3, 2009

Professor Steven N. Kaplan discusses (1) whether CEO pay is out of control; (2) the role of pay at banks and financial firms in regard to the financial crisis; and (3) whether proposed new regulations and caps make sense.

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By Luigi Zingales
FT.com, December 16th, 2009

The idea of imposing a tax on financial transactions, also called the Tobin tax after the economist who first proposed it, is back in vogue. It has strong political appeal, catering to demands to punish banks for the crisis they have bestowed. It satisfies the political need to do something to avoid a repeat of the crisis. And, at a time of fiscal crisis, it provides an easy way to raise revenues without increasing income taxes. Last Friday, European Union leaders urged the International Monetary Fund to consider such a tax.

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By Steven N. Kaplan
The Economists’ Voice

Pay structures weren’t the problem, argues Steven Kaplan, who suggests that contingent equity is a better way to avoid bailouts.

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By Ethan Harris, Bruce Kasman, Matthew Shapiro, and Kenneth West
This paper was prepared for the 2009 conference of the US Monetary Policy Forum (USMPF).

This report examines the role of oil in the macroeconomy with the aim of evaluating and guiding central bank responses to oil price movements.

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By Anil K. Kashyap and Frederic S. Mishkin
Wall Street Journal, November 9, 2009

Anil Kashyap and Frederic Mishkin discuss the Federal Reserve’s independence and the impact of  the Congressman Ron Paul’s bill (H. R. 1207).  They also explore an amendment that would mitigate the negative consequences of Congressman Paul’s bill.

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Myron Scholes Forum, October 28th, 2009

Chicago Booth Professor, John Cochrane, uses the money demand equation and valuation equation of government debt to understand fiscal and monetary policy in 2008-2009, to think about whether the US is headed for fiscal inflation and to think about what that inflation might look like.

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For additonal information, please refer to Professor Cochrane’s webpage.

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