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Report

Report of the Task Force on Financial Stability

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Glenn Hubbard

Dean Emeritus; Russell L. Carson Professor of Finance and Economics - Columbia Business School

Laurie Goodman

Vice President of Housing Finance Policy - Urban Institute

Anil Kashyap

Stevens Distinguished Service Professor of Economics and Finance - Booth School of Business, University of Chicago

Ralph Koijen

AQR Capital Management Distinguished Service Professor of Finance - University of Chicago Booth School of Business

Kara Stein

Distinguished Policy Fellow and Lecturer on Law - University of Pennsylvania Carey Law School

Senior Research Fellow and Director of the AI and Capital Markets Initiative - Center for Innovation at the University of California Hastings College of Law

Following the Global Financial Crisis of 2007-09, the U.S. and other economies shored up the resilience of their banks through more demanding capital and liquidity requirements and rigorous stress testing. The disruptions of financial markets at the onset of the pandemic in March 2020 underscored the vulnerabilities of markets and institutions that comprise the important—and growing—nonbank sector of the financial system through which much credit to businesses, households, and government flows.

The Task Force on Financial Stability was formed before the pandemic, in October 2019, by the Hutchins Center on Fiscal & Monetary Policy at the Brookings Institution and the Initiative on Global Markets at the University of Chicago Booth School of Business. Its mission was to identify gaps in the regulatory architecture and other features of the financial system (outside the regulated banking sector) that make it insufficiently resilient, and to recommend mitigating policies to regulators, Congress, and the industry.

The report focuses on the U.S. Treasury market, open-end mutual funds, housing finance, derivatives clearinghouses, and life insurance companies; it also makes recommendations for the structure and process of regulation, including the Financial Stability Oversight Council and the Office of Financial Research, both created by the Dodd-Frank Act, to increase the likelihood of spotting and addressing issues that will arise in the future.

The Task Force was chaired by Glenn Hubbard of Columbia University and Don Kohn of the Hutchins Center at Brookings. Other members were Laurie Goodman, Urban Institute; Kathryn Judge, Columbia Law School; Anil Kashyap, Chicago Booth; Ralph Koijen, Chicago Booth; Blythe Masters, Motive Capital; Sandie O’Connor, independent; and Kara Stein, University of Pennsylvania and University of California law schools.

Read the full report here, and watch the release event here.

For more from the task force…

Listen to a Brookings podcast: “Wessel’s Economic Update: Shadow banking system is a financial market vulnerability.”

Read a Bloomberg op ed by Task Force co-chairs Hubbard and Kohn: “Our financial early warning system is broken.”

Read a VoxEU op ed by Task Force members Judge and Kashyap: “Reforming the macroprudential regulatory architecture in the US.”

Get daily updates from Brookings