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The Big Bank Theory: Breaking Down the Breakup Arguments

December 3, 2014 Comments off

The Big Bank Theory: Breaking Down the Breakup Arguments
Source: Bipartisan Policy Center

The 2008 financial crisis threw into sharp relief the issue of “too-big-to-fail” (TBTF)—the challenge posed by financial institutions that were bailed out on concerns that their failure would cause damage to the rest of the financial system and the overall economy. Since then, policymakers and regulators have wrestled with how to address this problem. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank) put in place a series of measures to address the policy challenges of TBTF firms, including rules to enhance prudential supervision of individual institutions and reforms aimed at improving oversight of the overall financial system. Regulators have since agreed at a global level to yet-tougher prudential standards for large financial companies. Dodd-Frank also established a new legal authority to resolve a large and complex financial institution without the need for taxpayer support or further disruption to the financial system.

Have these sweeping reforms have gone far enough in addressing the policy challenge of large, complex financial institutions? If they have not, then further measures would be appropriate, including breaking up or shrinking the size of large financial institutions. Such efforts would aim to eliminate perceived government subsidies to large banks that might support their size, and thereby to lessen the purported negative impacts of problems associated with these institutions. But such actions would impose costs, on top of those already associated with the steps taken to date. These costs must be weighed against benefits in order to decide on the appropriate course of action.

This paper, a product of the Bipartisan Policy Center’s Financial Regulatory Reform Initiative, assesses those costs and benefits. What would be the consequences of breaking up the country’s biggest banks? What would dramatically shrinking their size mean for the financial sector, the U.S. economy, and the customers of these institutions? How would such a strategy work? This paper seeks to answer these important questions. We conclude that the reforms undertaken since the financial crisis have gone a long way toward addressing the TBTF issue. Proposals to break up major financial institutions entail greater costs than the benefits they would provide and are potentially outright counterproductive. It would be better to allow Dodd-Frank and other U.S. and global reforms to work as intended, rather than to break up the largest banks. Indeed, if Dodd-Frank works as intended, then there is no need for a break up.

A Diversity of Risks: The Challenge of Retirement Preparedness in America

October 14, 2014 Comments off

A Diversity of Risks: The Challenge of Retirement Preparedness in America
Source: Bipartisan Policy Center

Many Americans are anxious about their retirement prospects. In fact, a recent Gallup poll found that not having enough money for retirement is the number one financial worry among Americans. For some, this concern is justified, as they face the daunting prospect of running short of money in their later years. But there is considerable variation in preparedness for retirement, and the challenges are more complicated than many realize.

When evaluating the retirement security landscape, complexity is the one constant. Potential sources of retirement income are numerous and varied, including: continued work (perhaps on a part-time basis), Social Security benefits, drawdown of personal savings, workplace retirement plans, annuities, home equity, financial support from family members, and more. Understanding this patchwork and building a solid foundation upon which to retire is no easy task for the average American.

Additionally, even for those who do accumulate substantial resources, retirees’ incomes and living standards are subject to a variety of risks, such as poor investment choices or returns, unexpected medical bills, outliving one’s savings, and needing expensive long-term care.

The U.S. retirement landscape is difficult to describe for the “average” person because the state of any particular retiree’s finances depends so heavily on which sources of income they have, how much they have, and what life events occur that could drain their nest egg.

The Bipartisan Policy Center’s (BPC) Commission on Retirement Security and Personal Savings is examining the U.S. retirement system. Next year, the commission will make comprehensive recommendations to improve the financial security of Americans preparing for and in retirement. In advance of these recommendations, BPC staff is producing a series of white papers to highlight the retirement security challenges that public policy can address.

After a brief overview of the retirement system, this first white paper explores retirement preparedness through the lives of four fictional families, showing how they are preparing for retirement, what they could be doing better, and the risks that they will face over the course of their working years and their retirements.

Today’s Rising Terrorist Threat and the Danger to the United States: Reflections on the Tenth Anniversary of The 9/11 Commission Report

July 22, 2014 Comments off

Today’s Rising Terrorist Threat and the Danger to the United States: Reflections on the Tenth Anniversary of The 9/11 Commission Report
Source: Bipartisan Policy Center

Ten years ago today, we issued The 9/11 Commission Report, the official report of the devastating attacks of September 11, 2001. As we wrote in that report, we were acutely mindful of the responsibility we bore to the American people—and the families of the victims—to provide the most complete account possible of the events leading up to that terrible day. We used what we learned from that awful history to make recommendations as to how to make America safer. Most of those recommendations have been enacted into law or adopted as policy.

A decade later, we are struck by how dramatically the world has changed. In the United States, federal, state, and local authorities have implemented major security reforms to protect the country. Overseas, the United States and allies went on the offensive against al Qaeda and related terrorist organizations. Ten years ago, many feared that al Qaeda would launch more catastrophic attacks on the United States. That has not happened. While homegrown terrorists struck Fort Hood and the Boston Marathon, with tragic results, and while major attempted attacks on aviation have been disrupted, no attack on a scale approaching that of 9/11 has taken place.

America’s Long-Term Care Crisis: Challenges in Financing and Delivery

April 10, 2014 Comments off

America’s Long-Term Care Crisis: Challenges in Financing and Delivery
Source: Bipartisan Policy Center

An estimated 12 million Americans are currently in need of long-term services and supports (LTSS)—defined as institutional or home-based assistance with activities of daily living such as bathing, dressing, or medication management—including both seniors and persons under age 65 living with physical or cognitive limitations. In the next two decades, the U.S. health care system will face a tidal wave of aging baby boomers. This, among many other factors, will create an unsustainable demand for LTSS in the coming years.

Fewer family caregivers, increasingly limited personal financial resources, and growing strains on federal, state, and family budgets will further complicate efforts to organize and finance services. Although there is tremendous variation in what is, or will be, needed, fully 70 percent of people who reach the age of 65 will require some form of LTSS at some point in their lives. The number of Americans needing LTSS at any one time is expected to more than double from 12 million today to 27 million by 2050. Indeed, the demand for LTSS will substantially outpace the rate of growth in the U.S. economy over the next decade and drive significant growth in Medicaid spending.

Bipartisan Policy Center’s Experts Publish Recommendations to Improve Preparedness for a Cyber Attack on the North American Electricity Grid

March 12, 2014 Comments off

Bipartisan Policy Center’s Experts Publish Recommendations to Improve Preparedness for a Cyber Attack on the North American Electricity Grid
Source: Bipartisan Policy Center

The Bipartisan Policy Center (BPC) today published a new report through its Electric Grid Cybersecurity Initiative with recommendations on how to better prepare for cyber attacks against the electric grid. The report is authored by the initiative’s co-chairs General (Ret.) Michael Hayden, former director of the Central Intelligence Agency and National Security Agency; Curt Hébert, former chairman of the Federal Energy Regulatory Commission (FERC) and former executive vice president of Entergy Corporation; and Susan Tierney, former assistant secretary for policy at the Department of Energy.

Cyber attacks on key energy infrastructure, including the electricity system, are increasing in terms of frequency and sophistication. Electric grid failures are costly and have the potential to profoundly disrupt delivery of essential services, including communications, food, water, health care and emergency response. In light of these developments, BPC convened the Electric Grid Cybersecurity Initiative – a hybrid project of BPC’s Energy and Homeland Security Projects – to tackle these challenges.

Jihadist Terrorism: A Threat Assessment

September 26, 2013 Comments off

Jihadist Terrorism: A Threat Assessment
Source: Bipartisan Policy Center

Al-Qaeda’s core in Pakistan exerts less control over its affiliated groups and the CIA’s campaign of drone strikes in Pakistan has decimated the group’s leadership. Al-Qaeda affiliates in Yemen and Somalia have also suffered significant losses as a result of U.S. and allied countries’ counterterrorism operations over the past three years. As a result, many counterterrorism officials believe the chances of a large-scale, catastrophic terrorist attack by al-Qaeda or an al-Qaeda-affiliated or -inspired organization occurring in the United States are small.

At the same time, however, al-Qaeda and allied groups today are situated in more places than on September 11, 2001. They maintain a presence in some 16 different theatres of operation—compared with half as many as recently as five years ago. Although some of these operational environments are less amenable than others (South Asia, Southeast Asia), a few have been the sites of revival and resuscitation (Iraq and North Africa) or of expansion (Mauritania, Mali, Niger, Nigeria, and Syria).

A Bipartisan Rx for Patient-Centered Care and System-wide Cost Containment

June 7, 2013 Comments off

A Bipartisan Rx for Patient-Centered Care and System-wide Cost Containment

Source: Bipartisan Policy Center

High and rising health care costs consume a large and rapidly growing portion of the federal budget, crowding out investments in other crucial priorities such as education, defense and infrastructure and putting pressure on other priorities of households, businesses and governments.

This trend will only accelerate with the aging of the population and its increased dependence on federal and state financing of health care. Yet despite our high national spending, health care in the United States is uneven in quality and often wasteful, uncoordinated and inefficient. Leaders on both sides of the political aisle, and in the health and economic policy communities, recognize the urgency of improving the quality and effectiveness of care, while slowing the growth of spending. However, far too often, attempts to address our nation’s health and budget issues have been fragmented and unproductive, frequently due to partisan disagreements over how to approach these highly sensitive issues.

We, the four leaders of the Bipartisan Policy Center Health Care Cost Containment Initiative, came together to bridge this divide—to start a constructive dialogue on strengthening the U.S. health care system.

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