risk management and the unece policy framework michael p. malloy, ph.d. distinguished professor and...

Risk Management and the Risk Management and the UNECE Policy FrameworkUNECE Policy Framework

Michael P. Malloy, Ph.D.Michael P. Malloy, Ph.D.Distinguished Professor and ScholarDistinguished Professor and Scholar

University of the Pacific McGeorge School of LawUniversity of the Pacific McGeorge School of Law

19 October 201219 October 2012

FIABCI-USA UN Symposium

Raising the Standard of Real Estate Development around the World

Risk Management and the UNECE Policy Framework

Focus on risk management as a fundamental principle of financial services regulation

Objectives of FS regulation

Page 4: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

Objectives of FS regulation Supporting public confidence in the FS sectors

Page 5: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

Objectives of FS regulation Supporting public confidence in the FS sectors Maintaining safety and soundness in FS sectors

Page 6: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

Objectives of FS regulation Supporting public confidence in the FS sectors Maintaining safety and soundness in FS sectors Harmonization and efficiency across borders

Page 7: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

Traditional/standard approaches to risk supervision and management

Page 8: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

Traditional/standard approaches to risk supervision and management Examination

Page 9: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

Traditional/standard approaches to risk supervision and management Examination Supervisory standards

Page 10: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

Risk analysis and management principles

Page 11: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

Risk analysis and management principles Risk-weighted capital adequacy standards (Basel I and

its sequels)

Page 12: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

its sequels) Stress testing

Page 13: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

Stress Testing

Page 14: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

Blind spots in traditional approaches

Page 15: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

Blind spots in traditional approaches Limitations of risk analysis and management

Page 16: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

Blind spots in traditional approaches Limitations of risk analysis and management Complexity of U.S. regulatory structure

Page 17: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

UNECE Policy Framework makes an important contribution to the twin objectives of FS regulation

Page 18: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

UNECE Policy Framework makes an important contribution to the twin objectives of FS regulation Rigorous analytical foundation to the evaluation of an

extremely significant asset category

Page 19: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

UNECE Policy Framework makes an important contribution to the twin objectives of FS regulation Rigorous analytical foundation to the evaluation of an

extremely significant asset category Framework Principles provide a conceptual structure

that other risk management approaches cannot match

Page 20: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

UNECE Policy Framework Integrated national framework harmonized with regional and

international norms Efficient registration system Necessity of consistency with “rule of law,” including local practice Recognition of the role of real estate in economic development Clarity in financial and investment rules Access to credit, including mortgages and microfinance Transparency and credible valuation rules, particularly in advanced

financial products Credible appraisal criteria Recognition of the social policy dimension of real estate Necessity of professional development within the industry

Page 21: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

Page 22: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

Page 23: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

Page 24: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

Page 25: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

Page 26: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

Page 27: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

Complexity of U.S. Regulatory Structure

Page 28: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

Tour d’horizon Tour d’horizon of U.S. Regulatory Structureof U.S. Regulatory Structure(excluding Investment Firms and Securities Firms)(excluding Investment Firms and Securities Firms)

Federal Reserve Board (FRB) → SSFIs

Secretary of the Treasury Securities & Exchange Commission (SEC)

State Regulators → Holding ← Department of Justice [DOJ]

State Regulators Companies

|

FRB → Depository ← SEC

Office of the Comptroller of the Currency (OCC) Institutions DOJ

_____________________________________|___________________________________________

| | |

Commercial ← FDIC → Savings NCUA → Credit

Banks (insurer) Associations Unions

______|_____ _____________________|__________________ __|__

| | | | | |

State National Savings & Loan ← OCC → Savings State Federal

________|_____ ↑ ↑ Associations if insured Banks ↑ ↑

| | OCC FRB _____|_______ _____|______ State NCUA

FRS FRS | | | | Regulator

Member non-member State Federal State Federal

↑ ↑ | | | | | | | |

FRB, FDIC, State Mutual Stock Mutual Stock Mutual Stock Mutual Stock

State Regulator ↑ ↑ ↑ ↑

Regulator FDIC, State OCC State OCC

Regulator Regulator

Page 29: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

Origins of the Meltdown of

U.S. Financial Services Markets

Page 30: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

MortgageFinance

Companies,Banks and

Other Lenders(Mortgagees)

InstitutionalInvestors

MortgageFinance

Companies,Banks and

Other Lenders

Credit RatingAgencies

InvestmentBanks

Home Buyers(Mortgagors)

SubprimeMortgage

Market

MortgageTo Lender

SubprimeLoans Lenders

to Home PackageOwner (“securitize”)

or Buyer SubprimeLoans

Proceeds of CDOSales Fund Collateralized

Increasing Debt Obligations

Loans (“CDOs”)Marketed

Home Buyers (Mortgagors)Appraisers

Page 31: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

MortgageFinance

Companies,Banks and

MortgageFinance

Companies,Banks and

Other Lenders

InvestmentBanks

SubprimeMortgage

Market

MortgageTo Lender

Page 32: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

MortgageFinance

Companies,Banks and

MortgageFinance

Companies,Banks and

Other Lenders

InvestmentBanks

SubprimeMortgage

Market

MortgageTo Lender

Page 33: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

MortgageFinance

Companies,Banks and

MortgageFinance

Companies,Banks and

Other Lenders

InvestmentBanks

SubprimeMortgage

Market

MortgageTo Lender

Page 34: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

MortgageFinance

Companies,Banks and

MortgageFinance

Companies,Banks and

Other Lenders

InvestmentBanks

SubprimeMortgage

Market

MortgageTo Lender

Page 35: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

MortgageFinance

Companies,Banks and

MortgageFinance

Companies,Banks and

Other Lenders

InvestmentBanks

SubprimeMortgage

Market

MortgageTo Lender

Page 36: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

MortgageFinance

Companies,Banks and

MortgageFinance

Companies,Banks and

Other Lenders

InvestmentBanks

SubprimeMortgage

Market

MortgageTo Lender

Page 37: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

MortgageFinance

Companies,Banks and

MortgageFinance

Companies,Banks and

Other Lenders

InvestmentBanks

SubprimeMortgage

Market

MortgageTo Lender

Page 38: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

MortgageFinance

Companies,Banks and

MortgageFinance

Companies,Banks and

Other Lenders

InvestmentBanks

SubprimeMortgage

Market

MortgageTo Lender

Page 39: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

MortgageFinance

Companies,Banks and

MortgageFinance

Companies,Banks and

Other Lenders

InvestmentBanks

SubprimeMortgage

Market

MortgageTo Lender

Page 40: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

MortgageFinance

Companies,Banks and

MortgageFinance

Companies,Banks and

Other Lenders

InvestmentBanks

SubprimeMortgage

Market

MortgageTo Lender

Page 41: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

MortgageFinance

Companies,Banks and

MortgageFinance

Companies,Banks and

Other Lenders

InvestmentBanks

SubprimeMortgage

Market

MortgageTo Lender

Page 42: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

MortgageFinance

Companies,Banks and

MortgageFinance

Companies,Banks and

Other Lenders

InvestmentBanks

SubprimeMortgage

Market

MortgageTo Lender

Page 43: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

MortgageFinance

Companies,Banks and

MortgageFinance

Companies,Banks and

Other Lenders

InvestmentBanks

SubprimeMortgage

Market

MortgageTo Lender

Page 44: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

MortgageFinance

Companies,Banks and

MortgageFinance

Companies,Banks and

Other Lenders

InvestmentBanks

SubprimeMortgage

Market

MortgageTo Lender

Page 45: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

Identifying Key Regulatory and Supervisory

Problems The Death of Consumer Protection

Structural Problems in Regulation and

Supervision

Page 46: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

Problems The Death of Consumer Protection Structural Problems in Regulation and

Supervision

Page 47: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

MortgageFinance

Companies,Banks and

MortgageFinance

Companies,Banks and

Other Lenders

InvestmentBanks

SubprimeMortgage

Market

MortgageTo Lender

Structural gaps in regulation make for ineffective oversight

Page 48: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

U.S. Financial Regulatory System ― pre-DFAU.S. Financial Regulatory System ― pre-DFA(excluding Investment Firms and Securities Firms)(excluding Investment Firms and Securities Firms)

Federal Reserve Board (FRB)

Office of Thrift Supervision (OTS) → Holding ← Department of Justice [DOJ]

|

_____________________________________|___________________________________________

| | |

______|_____ _____________________|__________________ __|__

| | | | | |

State National Savings & Loan ← OTS, → Savings State Federal

↑ ↑ | | | | | | | |

FRB, State Mutual Stock Mutual Stock Mutual Stock Mutual Stock

Regulator State OTS State OTS

Regulator Regulator

Page 49: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

Two-Tiered StructureTwo-Tiered Structure

|

_____________________________________|___________________________________________

| | |

______|_____ _____________________|__________________ __|__

| | | | | |

↑ ↑ | | | | | | | |

Regulator Regulator

Page 50: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

Formal Multiplicity of DepositoriesFormal Multiplicity of Depositories

|

_____________________________________|___________________________________________

| | |

______|_____ _____________________|__________________ __|__

| | | | | |

↑ ↑ | | | | | | | |

Regulator Regulator

Page 51: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

Multiplicity of Chartering AuthoritiesMultiplicity of Chartering Authorities

|

_____________________________________|___________________________________________

| | |

______|_____ _____________________|__________________ __|__

| | | | | |

________↑ ____ ↑ ↑ Associations if insured Banks ↑ ↑

| State | OCC FRB _____|_______ _____|______ State NCUA

FRS Regulator RS | | | | Regulator

↑ ↑ | | | | | | | |

Regulator Regulator

Page 52: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

Two Deposit InsurersTwo Deposit Insurers

|

_____________________________________|___________________________________________

| | |

______|_____ _____________________|__________________ __|__

| | | | | |

↑ ↑ | | | | | | | |

Regulator Regulator

Page 53: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

Federal Regulators of Depository Institution SecuritiesFederal Regulators of Depository Institution Securities

|

______________________________________|

| | |

______|_____ _____________________|__________________ __|__

| | | | | |

↑ ↑ | | | | | | | |

FRB, FDIC Mutual Stock Mutual Stock Mutual Stock Mutual Stock

Regulator Regulator

Page 54: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

Federal Regulators of Securities ActivitiesFederal Regulators of Securities Activities

|

Office of the Comptroller of thurrency (OCC) Institutions DOJ

_____________________________________| ___________________________________________

| | |

______|_____ _____________________|__________________ __|__

| | | | | |

State National Savings & Loan ← OOTS → → Savings State Federal

________|_____ ↑ ↑ Associations f insured Banks ↑ ↑

↑ ↑ | | | | | | | |

FRB, FDIC tate Mutual Stock Mutual Stock Mutual Stock Mutual Stock

Regulator Regulator

Page 55: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

Origins of the Meltdown of

U.S. Financial Services Markets

Problems The Death of Consumer Protection Structural Problems in Regulation and

Supervision Failure of “Safety and Soundness” (“Prudential”)

Supervision

Page 56: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

MortgageFinance

Companies,Banks and

MortgageFinance

Companies,Banks and

Other Lenders

InvestmentBanks

SubprimeMortgage

Market

MortgageTo Lender

Failure of “safety and soundness” supervision by the federal banking regulators

Page 57: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

Anatomy of a Meltdown:Some Empirical Observations

on the Social Utility of Financial Services

and the Housing Market

Page 58: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

Page 59: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

Page 60: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

Page 61: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

Page 62: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

Page 63: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

•Lags in market reaction

Page 64: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

•Lags in market reaction•Counterintuitive price movement

Page 65: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

•Lags in market reaction•Counterintuitive price movement•Slide into collapse

Page 66: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

•Lags in market reaction•Counterintuitive price movement•Slide into collapse•Persisting bankruptcy

Page 67: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

Page 68: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

•Lags in market reaction

Page 69: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

•Lags in market reaction•Counterintuitive price movement

Page 70: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

•Lags in market reaction•Counterintuitive price movement•Abrupt collapse

Page 71: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

•Lags in market reaction•Counterintuitive price movement•Abrupt collapse•Swift return to operations (after JPMorgan Chase acquisition)

Page 72: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

Page 73: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

“Centralized Approach”

Page 74: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

● Programmatic

Page 75: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

● Programmatic

● Macroeconomic

Page 76: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

● Programmatic

● Macroeconomic

● Prolonged

Page 77: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

● Programmatic

● Macroeconomic

● Prolonged

● Favors large, institutional interests

Page 78: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

● Programmatic

● Macroeconomic

● Prolonged

“Case Resolution Approach”

Page 79: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

● Programmatic

● Macroeconomic

● Prolonged

● Individualized

Page 80: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

● Programmatic

● Macroeconomic

● Prolonged

● Individualized

● Microeconomic

Page 81: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

● Programmatic

● Macroeconomic

● Prolonged

● Individualized

● Microeconomic

● Swift turnaround

Page 82: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

● Programmatic

● Macroeconomic

● Prolonged

● Individualized

● Microeconomic

● Swift turnaround

● Emphasizes interests of depositors and borrowers

Page 83: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

Dodd-Frank Act (“DFA”) and the

current status of its implementation

Page 84: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

Essential structural problems persist

Page 85: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

U.S. Regulatory Structure post-DFAU.S. Regulatory Structure post-DFA(excluding Investment Firms and Securities Firms)(excluding Investment Firms and Securities Firms)

Federal Reserve Board (FRB) → SSFIs,

|

_____________________________________|___________________________________________

| | |

______|_____ _____________________|__________________ __|__

| | | | | |

↑ ↑ | | | | | | | |

Regulator FDIC, State OCC FDIC, State OCC

Regulator Regulator

Page 86: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

|

_____________________________________|___________________________________________

| | |

______|_____ _____________________|__________________ __|__

| | | | | |

↑ ↑ | | | | | | | |

Regulator Regulator

Page 87: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

|

_____________________________________|___________________________________________

| | |

______|_____ _____________________|__________________ __|__

| | | | | |

↑ ↑ | | | | | | | |

Regulator Regulator

Page 88: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

Mortgage Market Regulators – pre-DFA

Page 89: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

FSOC

Post-Dodd-Frank

& CFTC

CFPB

Mortgage Market Regulators – post-DFA

Page 90: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

Essential structural problems persist DFA delayed its own effectiveness for at least

one year, and as much as two years, now further slowed by regulatory delays

Page 91: Risk Management and the UNECE Policy Framework Michael P. Malloy, Ph.D. Distinguished Professor and Scholar University of the Pacific McGeorge School

Essential structural problems persist DFA delayed its own effectiveness for at least

one year, and as much as two years, now further slowed by regulatory delays

Does not address operations of government-sponsored housing finance enterprises Fannie Mae and Freddie Mac, reform of the mortgage markets, or the foreclosure crisis