This latest report by the Committee on Capital Markets Regulation analyzes the contagious panic at the core of the financial crisis in 2008 and calls for public discussion of how to contain contagion in the future. The paper outlines the array of government weapons that were deployed during the 2008 crisis to deal with contagion, including an expansion of the Federal Reserve’s role as lender of last resort, and the adoption of expanded guarantees of short-term creditors by the Treasury and the FDIC. The Committee’s paper examines whether such post-crisis reforms as capital requirements, liquidity requirements, and the creation of better bankruptcy procedures, obviate the need for strong contagion weapons, and it also raises the question of whether it is in the public interest to restore and perhaps even strengthen these weapons.

The Committee on Capital Markets Regulation takes no position on the resolution of these issues, but believes that it is urgently important to spark public debate on how best to confront and defeat contagion in the future.