House of Commons Treasury Committee

Appointment of Dr Donald Kohn to the interim Financial Policy Committee

Thirteenth Report of Session 2010–12

Volume II Oral and written evidence

Ordered by the House of Commons to be printed 17 May 2011

HC 1052–II Published on 20 June 2011 by authority of the House of Commons London: The Stationery Office Limited £6.00

The Treasury Committee

The Treasury Committee is appointed by the House of Commons to examine the expenditure, administration, and policy of HM Treasury, HM Revenue and Customs and associated public bodies.

Current membership Mr Andrew Tyrie MP (Conservative, Chichester) (Chairman) John Cryer MP (Labour, Leyton and Wanstead) Michael Fallon MP (Conservative, Sevenoaks) Mark Garnier MP (Conservative, Wyre Forest) Stewart Hosie MP (Scottish National Party, Dundee East) Andrea Leadsom MP (Conservative, South Northamptonshire) Mr Andy Love MP (Labour, Edmonton) John Mann MP (Labour, Bassetlaw) Mr George Mudie MP (Labour, Leeds East) Jesse Norman MP (Conservative, Hereford and South Herefordshire) David Ruffley MP (Conservative, Bury St Edmunds) John Thurso MP (Liberal Democrat, Caithness, Sutherland, and Easter Ross) Mr Chuka Umunna MP (Labour, Streatham)

Powers The committee is one of the departmental select committees, the powers of which are set out in House of Commons Standing Orders, principally in SO No 152. These are available on the Internet via www.parliament.uk.

Publication The Reports and evidence of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including press notices) are on the Internet at www.parliament.uk/treascom.

Committee staff The current staff of the Committee are Chris Stanton (Clerk), David Slater (Second Clerk), Adam Wales, Jay Sheth, Peter Stam and Daniel Fairhead (Committee Specialists), Phil Jones (Senior Committee Assistant), Caroline McElwee (Committee Assistant), Steve Price (Committee Support Assistant) and Nick Davies (Media Officer).

Contacts All correspondence should be addressed to the Clerk of the Treasury Committee, House of Commons, 7 Millbank, London SW1P 3JA. The telephone number for general enquiries is 020 7219 5768; the Committee’s email address is [email protected]

Witness

Tuesday 17 May 2011 Page

Dr Donald Kohn, member of the interim Financial Policy Committee Ev 1

List of written evidence

Page

1 Dr Donald Kohn: Response to Treasury Committee Questionnaire Ev 7 2 Dr Donald Kohn: Curriculum Vitae Ev 9

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Treasury Committee: Evidence Ev 1

Oral evidence

Taken before the Treasury Committee on Tuesday 17 May 2011

Members present: Mr Andrew Tyrie (Chair)

Michael Fallon John Thurso Mark Garnier Mr Chuka Umunna ______

Examination of Witness

Witness: Dr Donald Kohn, gave evidence.

Q1 Chair: Thank you very much for coming before Dr Kohn: No, I will be in Washington DC at the us today, Dr Kohn. This is a new body and requires, Brookings Institution. I think, a good deal of careful thinking on all our parts, about how it is going to function and how its Q3 Chair: How much time will you be in London? accountability will be adequately put in place; Dr Kohn: I will certainly come here quarterly for the something that we are looking at, in the context of a meetings and probably more frequently. I would wider examination of the accountability of the Bank intend to extend my time in London, at a minimum, of England. on those quarterly visits to have visits with people What lessons have you drawn from the financial in the financial markets and talk to people who have crisis? knowledge and interest in financial stability. Dr Kohn: I have drawn a number of lessons from the financial crisis, particularly relative to what I was Q4 Chair: So that we can get a feel for this, are we thinking, say, four or five years ago before the crisis talking about two or three weeks a year in aggregate, began. One lesson I have drawn is that markets, or are we talking about two or three months a year people in the markets, can become excessively in aggregate? complacent and relaxed about risk; not get adequate Dr Kohn: I would say more like a month to two in compensation. Another lesson I have taken— aggregate—in London you mean? Chair: Sorry, what did you say on compensation? I Chair: Yes. just missed that point. Dr Kohn: Certainly four weeks a year, plus some. Dr Kohn: Not get adequately compensated for the risk they were taking, especially the tail risk, which they Q5 Chair: You also advise Congress, don’t you? You tended to ignore. Another lesson I have taken is that advise through working on the Panel of Economic risks are sometimes not as distributed and dispersed Advisers to the Congressional Budget Office? as they appear to be on the surface. This was certainly Dr Kohn: That is a new position that I haven’t true of both credit risk in the mortgage market in the exercised yet and, in fact, because of the FPC meeting United States and elsewhere. In the United States, too in June, I will not be able to attend my first meeting much of it came to rest on a few monoline insurers— of the CBO. That is an advisory panel on the economy AIG and a few other places. Or liquidity risk, which and on macro-economic developments. ended up resting on the banking system and the banking system wasn’t adequately protected against Q6 Chair: Not related to the issues that the FPC is that. going to be dealing with? Another lesson I have drawn is that incentives matter. Dr Kohn: I would think only indirectly related to the I knew incentives mattered already, but I think that issues that the FPC are going to be dealing with. It is incentives, both in compensation and in the way the more about the macro US economy and the factors originate-to-distribute model worked, were not affecting that economy. sufficient to get people to recognise and take account of the risks. I think transparency is important. To some Q7 Chair: Have you given any consideration, if only extent I knew all these things a few years ago, but I to dismiss it, to the problem that there might be some think they have been driven home by the events of the conflict between these two functions? past few years; there are dangers and risks in obscure Dr Kohn: I don’t think there will be a conflict and non-transparent types of financial instruments between these two functions, Mr Chairman. I think when people start buying and selling and they don’t the CBO function is very focused on the US economy, understand what they have. I think I have learned how it is developing, and the issues there. The quite a few lessons, unfortunately, for the economy, I financial stability of the UK banking system would guess, in the past few years. have—I think at most—an indirect effect on the US economy and what we would be considering for the Q2 Chair: You have a very impressive and full CV. CBO. If I attend a meeting and I think there is any Will you be based in London while you are doing conflict of interest I certainly could and would drop this job? off that committee. cobber Pack: U PL: COE1 [E] Processed: [16-06-2011 09:30] Job: 012364 Unit: PG01 Source: /MILES/PKU/INPUT/012364/012364_w002_MP 02 - Don Kohn - Curriculum Vitae.xml

Ev 2 Treasury Committee: Evidence

17 May 2011 Dr Donald Kohn

Q8 Chair: You will drop off that committee? risky activities from the safety net. I thought a better Dr Kohn: Yes. way of doing that would be to increase the capital on Chair: If there is a clash of meeting times you will those risky activities. If the increase in the capital drop off that meant that the risky activities were no longer committee? profitable for the banks then they would stop doing Dr Kohn: As I have already, yes. them. If they still remained profitable but weren’t taking advantage of the safety net, I thought that was Q9 Chair: To be clear, the work in the UK is your a more flexible, subtle way of approaching the same priority? thing, rather than trying to draw a divide that I think Dr Kohn: That is correct. will be very difficult to draw.

Q10 Chair: I asked about conflict. I have no idea Q13 Chair: Is that still your view? After all, you’ve what goes on in the Panel of Economic Advisers, and got it now. since you haven’t apparently attended any of the Dr Kohn: We need to see how the Volcker Rule is meetings we are both somewhat in the dark. implemented. It is the law of the United States right Dr Kohn: Right. now. I think we need to see how it is going to be Chair: Let us suppose that in one of those meetings implemented to see how the costs and benefits line up. you were asked to comment on a regulatory proposal that the US authorities were considering, which would Q14 Chair: You have said that that line will be very have an impact on regulatory arbitrage, which would difficult to draw. have an impact on the location of business between Dr Kohn: I think it will be. the two main global financial centres, what action Chair: Of course, Sir John Vickers is busying trying would you take when asked that question? to draw one of those too. Dr Kohn: First of all, I don’t think that panel will be Dr Kohn: That is right, in terms of wholesale and asked that sort of question, but I think I would need retail banking. I think the line that the ICB is trying to be very careful that my first priority, and my first to draw is a more general line between wholesale and loyalty, is to the FPC, and I would not give advice retail banking, but it is the same kind of thing. It is that I thought in any way put the UK or the UK also going to be difficult to decide what goes in what financial system, or my role on the FPC, at a bucket. disadvantage. Q15 Chair: I am going to make two comments on Q11 Chair: Let’s flip that around the other way. Now your prior views on the Volcker Rule—the first bit, if you are sitting on the FPC and exactly the same I may say so, you appear to have stood up in the question is posed, are you going to say—since you remarks you have just made. I think it is clear that my have made it clear the FPC is your priority— source, as far as the first part is concerned, was “Actually, Governor, the way we can both reduce risk accurate and that you have deep reservations, or you and pick up all that business in Wall Street is to do did have deep reservations, about the Volcker Rule. X”? One of the objections I was told you had made to it Dr Kohn: I think I would be happy to answer the first was that not only would it not reduce risk but it would part of that question: the way we can reduce risk. I drive business offshore to other jurisdictions. Was that don’t think it is the business of the FPC necessarily to also correct? compete business away from other parts of the world. Dr Kohn: I do not recall having said that. There is I think the business of the FPC is to make the UK an issue, not necessarily driving business offshore but system safer and I need to answer that question. I would be happy to answer that question. driving business into less regulated entities where you don’t quite know what is going to happen and whether, then, those less regulated entities become a Q12 Chair: You were an opponent of the Volcker risk. Rule, weren’t you, Dr Kohn? Dr Kohn: I was not— Chair: I have had it reported to me that you have Q16 Chair: Into shadow banking? been, in private, a vigorous opponent of the Volcker Dr Kohn: Into shadow banking of one sort or Rule before it was implemented, but maybe these another—whether that shadow banking is onshore or reports are mere hearsay. offshore. Dr Kohn: I am not sure who reported that. Perhaps it was Mr Volcker. I thought a better way— Q17 Chair: It is more likely to be offshore, isn’t it? Chair: That would have been a good source, but as it Dr Kohn: I think that is a possibility. happens, in this case it wasn’t. Dr Kohn: I agree that there is a substantial issue with Q18 Chair: Now you can see the link between what banks, regulated institutions, that have a call on the I have asked about the Volcker Rule and the question public safety net: the deposit insurance, the right to about your order of priorities when working for the borrow from the Central Bank, using that safety net FPC, because you distinguished those two halves of and the implied backing of the Government to engage the question I asked you on the FPC earlier, saying in risky activities, particularly risky activities that you wouldn’t like to comment on the second part, but might end up having an effect on its use of the safety on the first part you would. Actually they may be net. So I am sympathetic to the idea of dividing those closely related, may they not? cobber Pack: U PL: COE1 [O] Processed: [16-06-2011 09:30] Job: 012364 Unit: PG01 Source: /MILES/PKU/INPUT/012364/012364_w002_MP 02 - Don Kohn - Curriculum Vitae.xml

Treasury Committee: Evidence Ev 3

17 May 2011 Dr Donald Kohn

Dr Kohn: That is correct. If the activities migrated to Dr Kohn: I think my experience, stretching back over London, for example, that would be something the 30 or 40 years in the financial markets, dealing with FPC and the PRA would have to be very careful crises, the lessons I learned over the past few years about. I think this is a general problem in the US, in and the positions I held, both in the United States and the UK and in other places where regulation is being internationally, give me a base of knowledge and a tightened up. You want it tightened up; you want the perspective that will be valuable on the FPC. system to be safer, and you have to watch very carefully where the activity might be migrating and Q22 Mr Umunna: Can I take this opportunity to make sure that—whether it is offshore or onshore— thank you for being so frank in answering in a very that risky activities are not taking root somewhere else honest way the quite difficult questions I just posed. that could also threaten the stability of the financial It is much appreciated. system. I wanted to ask you one thing about credit ratings Chair: Thank you. I am very heartened by your clear agencies, and something about the banks themselves. statement about your order of priorities, given all In relation to the ratings agencies, is it your view that your commitments. there needs to be reform of the issuer-pays model? Also, do you feel that the lack of competition in the Q19 Mr Umunna: Dr Kohn, you are the former vice- credit ratings agency market helped to contribute to chair of the Fed and led it with Alan Greenspan in the the mistakes that were made on their part? As you lead-up to the crash that many people now know said, blame isn’t isolated to regulators and about. Famously, the organisation was very much a organisations like the Fed. cheerleader for deregulation. I note that the Chair Dr Kohn: I would like to see reforms to the issuer- asked you what were the lessons learnt in the wake of pays model. I haven’t done a deep study of this, but I that crash. Perhaps I can borrow a question that was haven’t seen any suggestions that move in that asked by our congressional counterpart Henry direction very effectively. I think it is very hard. I Waxman to Mr Greenspan in Congress. Essentially the think it used to be a buyer-pays model 40, 45, 50 years lesson you learned, if I was to distil it—you can tell ago, and then the Xerox machine was invented and me if you disagree—is that you were wrong. free-riding became a very difficult issue. I don’t know Dr Kohn: That is correct. I placed too much how to get around that now. confidence in the ability of the private market I agree with you that more competition in that market participants to police themselves. would be useful, but I also think we need to be careful that more competition does not become competition for business by a race to the bottom, so we need to Q20 Mr Umunna: As a result of the mistakes that keep a careful eye on that. One of the things that you and the organisation made, millions of people disappointed me about the reforms of the credit rating around the globe lost their jobs and their livelihoods agencies is on the structured credits. I think their and suffered quite catastrophic consequences. Could I ratings of plain vanilla bonds aren’t that bad. Yes, they perhaps give you the opportunity now, in front of this missed Enron and other things, but academic studies Committee, to do something that Mr Greenspan failed have shown that over time, if anything, they are a little to do in front of the Congressional Committee, and on the conservative side, relative to the losses taken. that is to apologise for those mistakes? I think they went wrong in the structured products. I Dr Kohn: I deeply regret the pain that was caused to was strongly an advocate, and when I was on the millions of people in the United States, and around Financial Stability Forum and Financial Stability the world, by the financial crisis and its aftermath. I Board, supported their recommendation that think it is too narrow to put it all on the Federal structured products have a different rating, or at least Reserve. The fact that we have similar circumstances an asterisk or something, to alert the investment in very different systems in Europe, in the United community that a triple A was not a triple A; it had a Kingdom, in other parts of the world, suggests to me very different risk profile. I hope we move in that that there is a lot of blame to go around. direction. Mr Umunna: Of course. Dr Kohn: Most of the blame should be on the private Q23 Mr Umunna: Thank you for that. In relation sector: the people that bought and sold those securities to the banks, Mervyn King gave a widely reported and the credit rating agencies that rated them. I also interview earlier this year when he commented that agree that the cops weren’t on the beat; the regulators we have not yet solved the “too big to fail” or, as he were not as alert to the risks as they could have been, preferred to call it, the “too important to fail” problem and—to the extent they saw the risks—were not as in the banking sector here. What are your views on forceful in bringing them to the attention of that, and in particular—I was going to say, “What one management or taking actions, as they could have measure”, but I am not sure one measure would do been. All this with 20/20 hindsight, obviously. the trick—what for you, are the key things we need to do to tackle that problem? It is obviously a big one Q21 Mr Umunna: The FPC is charged, or will be and it impacts massively upon the people that we charged, with monitoring and identifying systemic represent. risks. Given that you were wrong, given that Dr Kohn: It is a huge problem and it has gotten much catastrophic mistakes were made, why now are you a worse since the crisis, obviously, given the steps that fit person to sit on the committee to discharge that Governments took all over the world to bolster their duty? largest, most systemically important banks in the cobber Pack: U PL: COE1 [E] Processed: [16-06-2011 09:30] Job: 012364 Unit: PG01 Source: /MILES/PKU/INPUT/012364/012364_w002_MP 02 - Don Kohn - Curriculum Vitae.xml

Ev 4 Treasury Committee: Evidence

17 May 2011 Dr Donald Kohn crisis. As you say, I don’t think there is one step we you see as the biggest areas of risk? Do you think it can take. I think we can, both in the UK and in the is the banking system? US, take steps that help, and have already begun. Step Dr Kohn: The UK financial system is one that, more number one is to make them much less likely to fail: than the US financial system, is dominated by banks, much higher capital. I would include a so-called SIFI and dominated by a few large banks, so our attention surcharge in that, on top of the Basel III capital is naturally drawn there. I do think that we need to requirements and I hope that it is a substantial be very careful—as in my answer to the Chairman’s surcharge, on the order of the 3% people are talking question—that as we tighten up regulation and raise about. And much greater liquidity buffers; I know the capital liquidity requirements for those larger banks, FSA is already moving ahead of the Basel committee we don’t see risk migrate outside the banking system on that and I applaud those actions. to places that are not subject to as much scrutiny. One of the jobs of the FPC will be to keep a careful eye Q24 Mr Umunna: Do you think that is a problem on whether the boundary of regulation is drawn at the for us here in the UK, for the FSA to be doing that? right place, and to alert the Government, and you, if Obviously, many in the banking sector are up in arms we think there are problems developing. because the FSA is adopting a much tougher approach I think most of our attention will be on the banking on the liquidity requirements, going somewhat further system, particularly initially. That is where the than Basel. Do you think that is a problem? problems were, but I don’t think we can just Dr Kohn: I think there is a balancing that needs to concentrate on the banking system. happen. You need to make the banks safer, for sure, and to reduce the premium they get from “too Q28 Mark Garnier: Fair enough. You also important to fail”. At the same time, you need to have mentioned that people might try and find a way of the banks lending and you need to make sure that getting around the rules. How concerned are you that credit is available, so it is a very difficult balancing. the tools that are going to be available to the FPC are going to be circumvented by practitioners and Q25 Mr Umunna: Do you think we have the financial market participants? balance right? Dr Kohn: I am sorry; I did not hear the last part of Dr Kohn: Given where we have been, and given my your question. new priorities on the FPC for the stability of the UK Mark Garnier: How concerned are you that the tools banking system, I would rather see the UK be a little that are going to be designed by the FPC in order to ahead of that liquidity curve than behind it. The costs keep control of things will be circumvented by of being behind it, as we have seen, are just too large. financial market participants? We need the system to be stable, and stable to shocks Dr Kohn: I think we need to be careful that any that no one can really anticipate. circumvention doesn’t put at risk the UK financial The other angle in the “too important to fail” issue is system. It is one thing to have risky activities migrate to make failure easier or less disruptive. away from the UK to someplace else and not come back into the UK, but to the extent that they migrate Q26 Mr Umunna: Do you mean with resolution somewhere else and put at risk the UK financial mechanisms? system, and the banks headquartered in the UK, I Dr Kohn: Resolution mechanisms, the living wills think we need to be very careful about that. I believe and the international co-operation and co-ordination the FPC will not only be looking at risks in the UK, across borders, which are so important. I know Mr but at risks to the UK financial system that might Tucker is working hard on that, from the Bank of originate elsewhere in the system. I note that the England. There is a long way to go, but I think we are December Financial Stability Report highlighted making progress on both sides of the Atlantic. Getting some of the things going on in emerging market back to your credit rating agencies, it would be nice economies, for example, and I would expect that to to see that notching come down. I hate to use the be part of our discussions every quarter. credit rating agencies as a metric for anything, but the unsupported notches are so large now that I think we Q29 Mark Garnier: As you say, it is important to want to see that moving down. Importantly, it would identify where the risk is going, and obviously the be nice to see it because if the unsupported ratings quantity of the risk. None the less, it still comes down were moving up, then the value of the Government’s to the tools that you are going to be using to try and support would be much less, but I think that is an tackle this. What are the first tools that you would like objective. the interim FPC to start developing? What do you Mr Umunna: Thank you very much. think are the priorities in terms of these tools? Dr Kohn: The development of tools is one of the tasks Q27 Mark Garnier: The interim FPC is tasked to that the Government has given to the FPC. We have identify risks to the UK financial system. You have not had any discussion of that yet. We will be just answered a lot of questions from my colleague, discussing that in September. My own view is that on one of which you said that the role is to look at various tools on the capital side are very important, the UK banking system. Do you see the UK banking both the level and quality of the capital and the system as the biggest potential risk, because you cyclicality of the capital. I would like to see this haven’t talked about the other parts of the system: counter-cyclical capital tool developed. On the risk insurance, property markets, stock markets, that kind denominator of that—the risk weights on the assets— of stuff? 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Treasury Committee: Evidence Ev 5

17 May 2011 Dr Donald Kohn weights on particular assets. If we or the PRA see equities, which is something else that has a self- problems developing in particular sectors, we need to defeating element. As markets go down you increase look very carefully at the various liquidity tools that the margin requirements, and vice versa. are now being developed and put forward. Another set Dr Kohn: You don’t want to act in a pro-cyclical way. of tools is in loan-to-value ratios and margins; loan- That is correct. You don’t want to be lowering the to-value ratios not only for, say, households borrowing loan-to-value ratios as the market goes down, and against their houses or cars, or whatever, but also make it even harder—for people to need even higher loan-to-value ratios—margins—in securities markets. down-payments to make their purchases. It is a I think one of the things that contributed both to the difficult tool but, I agree, you do not want to make it run-up in risk-taking and the subsequent crash was, pro-cyclical, that’s for sure. in the run-up, that margins got too low. People were allowing folks to borrow with very little margin, Q32 Mark Garnier: One of the big issues at the people weren’t marking to market, or they weren’t moment is that we are all having a great deal of global demanding collateral against marks, particularly from navel-gazing over the financial system, rewriting rules triple A companies. AIG is a great example of that; and all the rest of it, so there is a lot of very high their counter-parties were not demanding collateral quality brainpower looking at this. Do you not see that from them because they were supposed to be triple A- it could potentially be a risk that in the future, when rated, and then the whole thing came crashing down. things settle down and we get past this crisis and into Then, on the way down, you had self-fulfilling kinds a longer period of stability, an organisation like the of spirals, in which declining asset prices meant FPC may slightly take a back seat and put its feet up higher margins, which then led to fire sales and more and say, “We’ve got this right, we don’t have to worry declines in asset prices. I think we need to take a about it too much”? Do you think there is a possibility careful look at whether some Government oversight of backing off? and regulation of the margins in these markets, trying Dr Kohn: I think it is a risk that the FPC will need to to look through the cycle to some extent, would be be very conscious of. Bad loans are made in good useful. I am not quite sure how that would work. I times and the FPC needs to be quite aware, and don’t know, but it is something to look for. certainly I, as an external member, will keep that in mind during my tenure on the FPC. That is kind of Q30 Mark Garnier: It is quite interesting to hear what happened, isn’t it, in the 2000s? At least in the you talk about this, because you talk about two ends US, we had two decades of growth with two relatively of the scale: you have the big, big banking liquidities minor recessions. House prices always went up. and Basel III surcharges, and this kind of stuff, and Everybody relaxed—in the financial sector, in the right at the other end you have loan-to-value ratios on regulatory sector—and it turned out to be a big mortgages. As you say, those bigger ones are going to mistake. We need to guard against that, I agree. be looking through the cycles, and you can do that. But at the end of the day, when you’ve got a property Q33 Mark Garnier: Here is the important one, bubble, you’ve got a property bubble. Frankly, do you following Mr Umunna’s point: do you think you have think there should be more emphasis on these smaller, sufficiently learned from the mistakes that were made more direct interventions, such as loan-to-value ratios, in the US? I always believe that the more grey hair because there are certain other risks that come up with you have—I am prematurely grey—the more life that type of thing, in terms of work force mobility and experience you have. I also believe that everybody people at the lower end of the income scale? makes mistakes but you can’t make the same mistake Dr Kohn: And whether they have access to credit or twice. Do you believe that you will not make the same not. There is always a difficult trade-off when you mistake twice? start regulating the nature of a consumer product, Dr Kohn: I believe I will not make the same mistake because you can prevent abuses but you also constrict twice, yes. the availability of credit, and getting that balance right Mark Garnier: Fantastic. I hope you never have to is difficult. I think there is a mortgage market review come before us to explain any future mistakes. under way—is that correct?—and they are looking at Thank you. loan-to-income ratios. I think that will be useful in preventing some things perhaps swinging too far. We Q34 John Thurso: Can you give me a definition of would need to look at the mortgage market review, or financial stability? you would need to, in the context of everything else, Dr Kohn: It is very hard, Mr Thurso. I think what and see whether that might act and make that a little we are looking for is the financial sector not to be less pro-cyclical, make sure that the people who are contributing to making the cycles much worse on the getting the mortgages can afford to pay them. I think way up and the way down. Financial instability is that will be helpful. I take your point: the loan-to- something we recognise when we see it. Certainly, we value ratio is a tempting tool. There are a lot of have had it the last few years. Financial stability— emerging market economies that use it. It probably perhaps on Mr Garnier’s points—you kind of take it could be put to use, lowering it in very hot markets for granted, but I think the point of the FPC, and of and raising it when the markets collapse. It is not a the Government’s proposed changes, is to make sure simple thing to do but I think we should look at it. that the financial sector isn’t an intensifier of the natural cycles in the markets, the so-called Q31 Mark Garnier: Indeed, loan to value is not the externalities. Yes, asset prices will fluctuate, credit only thing. You talked about margin requirements on will fluctuate and people will make mistakes, but what cobber Pack: U PL: COE1 [E] Processed: [16-06-2011 09:30] Job: 012364 Unit: PG01 Source: /MILES/PKU/INPUT/012364/012364_w002_MP 02 - Don Kohn - Curriculum Vitae.xml

Ev 6 Treasury Committee: Evidence

17 May 2011 Dr Donald Kohn we don’t want is developments in the financial sector Q36 John Thurso: If one went back to, say, around making those cycles much worse than they otherwise 2004, 2005, 2006, that sort of period, when a lot of would be, with adverse feedbacks on jobs and income. people were saying, “Household debt is too high, That can happen on the way up and the way down. public debt is too high”, and were questioning the The financial sector needs to be a way of translating golden rule, all sorts of things like that, it would have the savings of the economy into investment in an been almost impossible to turn around at that point efficient way. There is some pro-cyclicality that will and say, “In two years’ time, most of our banks will always be true in the financial sector. What we are be basket cases and several of them will have been trying to do is damp down the extreme versions of bought by the country.” You would have been locked that, where credit becomes way too available on the up, probably, or put in a padded cell if you had said way up and way too constricted and restricted on the that. That is the problem you will confront: when you way down, making the business cycle worse. need to be able to blow the whistle and say, “This is out of kilter”, is the very moment when everybody is rushing to the trough to fill up in every way they can. Q35 John Thurso: Here is my problem. The If you can’t measure it—if you don’t have dials so legislation that is being proposed changes the that you can say, “This is a robust view”—will the objective for the Bank of England, and its new FPC ever be able to deliver on its objective? objective is that the Bank shall be, “To protect and Dr Kohn: I think we will, and I think it won’t be by enhance the stability of the financial system of the looking at one or two dials. I think we will be able to United Kingdom”—the Financial Stability Objective. come to you and say, “We took these actions for the The FPC’s objective is, “The Financial Policy following set of reasons. Here is the risk we saw.” Committee is to exercise its functions with a view to Part of the accountability and transparency of the contributing to the achievement by the Bank of the committee will be to explain to you what risks we saw Financial Stability Objective”. Which is all and why we took the actions that we have taken, or motherhood and apple pie, really, unless you can say asked the PRA to take the actions we have taken. I what it is—unless you can measure it and do don’t think it will be any one thing, I think it will be something about it. We had a long discussion about a series of things, but I share your concern. In the the tools and what you might do, but I am more US, the saying about monetary policy from William concerned with the fundamental point that we say Machesney Martin is: the role is to take away the what it is or isn’t, and we work out measurements of punchbowl when the party gets going. That is going that so we can take action. How do you think the FPC to be exactly the role of the FPC, and it is going to be is going to come anywhere near meeting that not a very popular thing to do. The banks are going challenge? to tell us about how much profit they are losing and Dr Kohn: There will be a number of different metrics how the business is going to move offshore to that can be used, for example, in the aggregate credit different places. Putting this into a committee and growth relative to GDP; leverage in the financial putting the committee in the Bank of England, which sector; leverage in the household or business sector; has independent status within Her Majesty’s mismatches in the maturity transformation— Government, will be helpful in this regard. The Bank borrowing short, lending long—in the financial sector. and the FPC are going to have to step up to this very We will have a number of ways of trying to measure difficult job. Actually, don’t worry about this in the whether the system has become more exposed or not, next few years. but I don’t think we are going to come up with John Thurso: No. The guys who are going to create something like the rate of inflation, which gives us a the next crisis are at primary school at the moment. nice feedback every month on how we are doing Dr Kohn: Exactly. As I said, your successors and my relative to the targets given to us by the Government successors are the ones that are going to have to worry and the Parliament. It is just going to be softer and about this. The Bank has to be aware of this. You and mushier than that. To some extent, you will know your successors need to be aware of this and hold the when we have failed. It will be obvious when we fail. Bank’s feet to the fire on this, and back the Bank and the FPC when it takes these unpopular steps. John Thurso: That is what worries me. Dr Kohn: That worries me too, but you should be Q37 John Thurso: This is the last area I want to ask glad that I am worried about that. If your successors about. Back in the objectives that the Treasury has are up here grilling my successors about why the given there is a caveat: “This does not require or Government had to come to rescue the big banks, we authorise the committee to exercise its functions in a obviously failed. It is also important that if your way that would, in its opinion, be likely to have a successors are up here congratulating my successors significant adverse effect on the capacity of the about the fact that there haven’t been any cycles in financial sector to contribute to the growth of the UK credit, that asset prices have been very quiet and that economy”, which we have touched on a little bit there haven’t been any innovations in the system, we already. One of the problems, and the great difference have also failed. Part of the balance that we need to between the UK and the US financial sectors, is that strike is allowing the system to fluctuate, allowing the US financial sector is a percentage of the total innovations to take place, allowing new ways of economy; the UK financial sector is a multiple of the translating the savings into investment to occur, but total economy. Therefore, the effect on this country of without allowing them to have major effects on the over-exuberance going wrong is monumental, perhaps economy. a great deal more so than in the States. Isn’t that cobber Pack: U PL: COE1 [O] Processed: [16-06-2011 09:30] Job: 012364 Unit: PG01 Source: /MILES/PKU/INPUT/012364/012364_w002_MP 02 - Don Kohn - Curriculum Vitae.xml

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17 May 2011 Dr Donald Kohn statement a very dangerous “get out of jail” card? As consultative document, at least in some places. There time goes by and memories fade and new generations is no substitute for a stable system. The costs of an come in, people will say, “Look how well our unstable system are just so high. But you can’t go all economy is doing, look how much we are flogging the way in that direction—towards stability—and our services all around the world. You can’t possibly stifle innovation. Yes, it is going to be a difficult do anything.” Isn’t that a really dangerous caveat? balancing. I think the question you asked before, Mr Dr Kohn: I think it is appropriate to have that caveat. Thurso, is the same kind of thing. The committee is I think the FPC and the PRA need to weigh the costs going to have to be able to say, “We have taken this and benefits of any additional regulation, but the into account, we have weighed the costs and benefits benefits of keeping a stable system are huge. We have and we believe this step is necessary and here is why”. seen the cost of not keeping a stable system. Even John Thurso: It comes back to the vital importance though one of these crashes may come every 30 or 40 of setting out, at an early stage in the committee’s life, years, the costs are tremendous and we need to keep the criteria for meeting the objective, so that those are that in mind. At the same time, I think it is possible, not in dispute at the moment of crisis. as I noted before, to make the regulations so tight and Chair: Thank you very much for coming before us the system so stable that it is unable to exercise its with some very full, informative and interesting function in a way that promotes growth, so having exchanges. I am sure they will be the first of many. that balance will be difficult. You have touched on a number of subjects I am sure In my view the stability part of the remit is primary, we will wish to return to. Thank you for coming. and that is conveyed also in the language of the The Committee will now go into private session.

Dr Donald Kohn: Response to Treasury Committee Questionnaire 1. Do you have any business or financial connections or other commitments which might give rise to a conflict of interest in carrying out your duties as a member of the FPC? No, I do not have any such interests or commitments, and I have been and will continue to check with the Bank of England before making any commitments to ensure that no such conflicts arise. I am a senior fellow at the Brookings Institution, a nonprofit public policy research organization. In addition, I am on the Board of Directors of AlliancePartners, a start-up company that will identify, originate, distribute, and service commercial loans to small and regional banks in the United States. I give speeches sponsored by a wide range of both financial and nonfinancial businesses arranged through the Washington Speakers Bureau. I am on advisory committees for the IMF and FDIC. I am about to become a trustee of the College of Wooster, my alma mater. I will soon become Senior Economic Strategist for the Potomac Research Group, analyzing economic developments in the United States for their clients, which are entirely U.S. based.

2. Do you intend to fill out the full term for which you have been appointed? Yes.

3. Please explain how your experience to date has equipped you to fulfill your responsibilities as a member of the FPC. In particular, what areas of the FPC’s work do you believe you will make a particular contribution to, and which will you have to undertake additional research into upon your arrival? Throughout my years on the staff of the Federal Reserve Board (1975Ð2002) I dealt closely with the behavior of financial markets. For example, as Secretary of the Federal Open Market Committee and director of the Division of Monetary Affairs from 1987 to 2000, I served as liaison between the Board of Governors and the Federal Reserve Bank of New York in the daily execution of open market operations and monitoring of developments in financial markets; I was also responsible for the administration of the discount window for the Federal Reserve system. In those positions I played an important role in advising the Board on financial stability issues, especially when stability was threatened by such developments as the stock market collapse of 1987, the failure of many banks and thrifts in the late 1980s and early 1990s, and the Russian debt default- LTCM disruptions of 1998. Throughout this period I also developed close working relationships with other central bankers dealing in monetary policy and financial markets. When I became Vice Chairman of the Board in June 2006 I began to attend some BIS meetings as the Federal Reserve representative and became the chair of the Committee on the Global Financial System. The CGFS monitored and studied the stability of financial systems around the world, reporting to the governors of the central banks. Those responsibilities took on added importance as the financial crisis erupted and then deepened beginning in the fall of 2007. The reports of our meetings to the governors helped to focus their discussion on vulnerabilities and responses. In response to the crisis, the CGFS undertook studies on liquidity management of globally active banks, on margining and haircut practices for securities financing, on macro- prudential regulation, on the provision of liquidity by central banks, and other topics. As chair of the CGFS, I also served on the Financial Stability Board, helping to identify sources of instability in global financial markets and suggest reforms to address those vulnerabilities. cobber Pack: U PL: COE1 [E] Processed: [16-06-2011 09:30] Job: 012364 Unit: PG01 Source: /MILES/PKU/INPUT/012364/012364_w002_MP 02 - Don Kohn - Curriculum Vitae.xml

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In addition, I was deeply involved in the Federal Reserve’s reaction the financial crisis, working with Chairman Bernanke and others in the Federal Reserve System and the Treasury to understand what was happening and to design responses that contained the damage. Among many other tasks, I oversaw the “stress tests” for the Federal Reserve in the spring of 2009; the design and execution of those tests demonstrated the value of combining the expertise of economists and supervisors and of conducting the same forward-looking tests across all systemically important banks simultaneously—a template that subsequently has informed the conduct of supervision in the United States and elsewhere.

This background has given me a detailed understanding of the U.S. financial system and, importantly, its vulnerabilities that I believe will be quite useful to the FPC as it assesses the stability of the U.K. financial system. U.S. financial markets are critical to global stability, as we saw over the past few years, and problems that arose in U.S. markets could well show up in U.K. markets. In addition, this background, along with my experience working with other central bankers over the years and my time on the CGFS and FSB means I have considerable knowledge of global financial markets and their interconnections, including the international and wholesale markets in which global U.K. banks operate; this will be especially helpful as the FPC considers the implications for financial stability of the actions and positions of global banks headquartered in the U.K.

I recognize that I need to enhance my knowledge of the particular characteristics of the U.K financial system, especially the retail operations of that system. I have requested and received suggestions for background reading from the staff of the FPC, which I am pursuing. In addition, they are arranging opportunities for me to meet with participants in the U.K financial system. I expect to continue the program of periodic meetings with U.K. market participants while I am on the FPC.

4. Which of your publications and papers are of most relevance to your future work on the FPC?

Testimonies: 19 June 2008. Risk management and its implications for systemic risk Before the Subcommittee on Securities, Insurance, and Investment, Committee on Banking, Housing, and Urban Affairs, U.S. Senate http://www.federalreserve.gov/newsevents/testimony/kohn20080619a.htm. 5 June 2008. Condition of the banking system Before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate. http://www.federalreserve.gov/newsevents/testimony/kohn20080605a.htm

Speeches: 29 January 2010 Focusing on Bank Interest Rate Risk Exposure At the Federal Deposit Insurance Corporation's Symposium on Interest Rate Risk Management, Arlington, Virginia. http:// www.federalreserve.gov/newsevents/speech/kohn20100129a.htm 16 November 2009. Policy Challenges for the Federal Reserve At the Kellogg Distinguished Lecture Series, Kellogg School of Management, Northwestern University, Evanston, Illinois. http:// www.federalreserve.gov/newsevents/speech/kohn20091116a.htm 10 July 2009. Comments on "Financial Intermediation and the Post-Crisis Financial System”. At the Eighth BIS Annual Conference 2009, Financial System and Macroeconomic Resilience: Revisited, Basel, Switzerland. http://www.federalreserve.gov/newsevents/speech/kohn20090710a.htm 11 September 2008. Comments on “Financial Regulation in a System Context,” “Beyond Leveraged Losses: The Balance Sheet Effects of the Home Price Downturn”, and “The Central Role of House Prices in the Financial Crisis: How Will the Market Clear?”At the Brookings Panel on Economic Activity, Washington, D.C. http://www.federalreserve.gov/newsevents/speech/kohn20080911a.htm 17 April 2008. The Changing Business of Banking: Implications for Financial Stability and Lessons from Recent Market Turmoil At the Federal Reserve Bank of Richmond's Credit Market Symposium, Charlotte, North Carolina http://www.federalreserve.gov/newsevents/speech/2008speech.htm 18 May 2006. The Evolving Nature of the Financial System: Financial Crises and the Role of the Central Bank At the Conference on New Directions for Understanding Systemic Risk, New York, New York. http://www.federalreserve.gov/newsevents/speech/kohn20060518a.htm

Research papers: April 2010. Financial Statistics for the United States and the Crisis: What Did They Get Right, What Did They Miss, and How Should They Change? Matthew J. Eichner, Donald L. Kohn, and Michael G. Palumbo http://www.federalreserve.gov/pubs/feds/2010/201020/201020pap.pdf August 2007. The Rise in U.S. Household Indebtedness: Causes and Consequences Karen E. Dynan and Donald L. Kohn http://www.federalreserve.gov/pubs/feds/2007/200737/200737pap.pdf cobber Pack: U PL: COE1 [O] Processed: [16-06-2011 09:30] Job: 012364 Unit: PG01 Source: /MILES/PKU/INPUT/012364/012364_w002_MP 02 - Don Kohn - Curriculum Vitae.xml

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Selected CGFS Papers under my Chairmanship: Funding Patterns and Liquidity Management of Internationally Active Banks http://www.bis.org/publ/ cgfs39.htm Macroprudential Instruments and Frameworks: A Stocktaking of Issues and Experiences http:// www.bis.org/publ/cgfs38.htm The Role of Margin Requirements and Haircuts in Procyclicality http://www.bis.org/publ/cgfs36.htm Central Bank Operations in Response to the Financial Turmoil http://www.bis.org/publ/cgfs31.htm

Dr Donald Kohn: Curriculum Vitae Current Positions: Senior Fellow, Economic Studies Program, Brookings Institution. External Member, Interim Financial Policy Committee, Bank of England. Board of Directors, AlliancePartners, a start-up company that will identify, originate, distribute, and service commercial loans to small and regional banks in the United States. Speeches arranged through the Washington Speakers Bureau on the economic outlook for the United States. Senior Economic Strategist, Potomac Research Group (from June) consulting on the US Economy. IMF Monetary and Capital Markets Department—member of two advisory committees: Macroprudential Policy Money and Exchange Rate Policies Member, Board of Trustees of the College of Wooster. Member, Congressional Budget Office, Panel of Economic Advisors.

Past Positions: Federal Reserve System Board of Governors, Washington DC Vice Chairman of the Board of Governors 2006Ð10 Chair, Committee on the Global Financial System at the Bank for International Settlements 2006Ð10 Member, Board of Governors, 2002Ð06 Advisor to the Board for Monetary Policy (2001Ð02), Secretary of the Federal Open Market Committee (1987Ð2002), Responsible for formulating and presenting alternative monetary policy strategies to the Federal Open Market Committee and overseeing the communications of the Committee. Director of the Division of Monetary Affairs (1987Ð2001) Served as liaison with the Federal Reserve Bank of New York on the daily implementation of open Market operations and monitoring developments in US financial markets; oversaw data publication and research on money, bank credit, US Treasury markets, and monetary policy; oversaw the administration of the Federal Reserve’s discount window. Deputy Staff Director for Monetary and Financial Policy (1983Ð87) Assisted the staff director responsible for monetary policy strategies, the discount window, FOMC communication, and monitoring key segments of the financial markets. Associate director, Division of Research and Statistics (1981Ð83) Oversaw several sections engaged in research and analysis of US financial markets. Chief of Capital Markets, Division of Research and statistics (1978Ð81)

Oversaw research and analysis of corporate and municipal securities markets in the US Economist, Division of Research and Statistics (1975Ð78) Federal Reserve Bank of Kansas City Economist (1970Ð75) cobber Pack: U PL: COE1 [E] Processed: [16-06-2011 09:30] Job: 012364 Unit: PG01 Source: /MILES/PKU/INPUT/012364/012364_w002_MP 02 - Don Kohn - Curriculum Vitae.xml

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Education: B.A. (Economics), The College of Wooster, 1964; Ph.D. (Economics), University of Michigan, 1971

Honors: Honorary Degree, Doctor of Laws, from the College of Wooster (2006). Distinguished Achievement Award from The Money Marketeers of New York University (2002), Distinguished Alumni Award, the College of Wooster (1998)

Publications: Eichner, Matthew J., Donald L. Kohn, and Michael G. Palumbo. “Financial statistics for the United States and the crisis: what did they get right, what did they miss, and how should they change?” (2010) Board of Governors of the Federal Reserve System (US), Finance and Economics Discussion Series: 2010Ð20. Kohn, Donald L. “Monetary Policy and Asset Prices Revisited”. Cato Journal 29.1 (2009): 31Ð44. Kohn, Donald L. “Interpreting the Unconventional US Monetary Policy of 2007Ð09: Comment”. Brookings Papers on Economic Activity (2009): 172Ð176. Kohn, Donald L. “Financial Regulation in a System Context: Comment”. Brookings Papers on Economic Activity (2008): 262Ð266. Kohn, Donald L. “Inflation Modeling: A Policymaker's Perspective”. Journal of Money, Credit, and Banking 39.(2007): 181Ð186. Dynan, Karen E., and Donald L. Kohn. “The rise in US household indebtedness: causes and consequences”. (2007). In Christopher Kent and Jeremy Lawson, eds., The Structure and Resilience of the Financial System, Proceedings of a Conference, Reserve Bank of Australia, Sydney. Kohn, Donald L. “Reflections on Globalisation and Policies”. Economic and Financial Review 13.3 (2006): 103Ð114. Kohn, Donald L. “The Evolving Nature of the Financial System: Financial Crises and the Role of the Central Bank”. Economic and Financial Review 13.3 (2006): 115Ð126. Kohn, Donald L. “Business Capital Spending”. Economic and Financial Review 13.3 (2006): 127Ð134. Kohn, Donald L. “Monetary Policy and Asset Prices”. Economic and Financial Review 13.3 (2006): 135Ð147. Kohn, Donald L. “Research at the Federal Reserve Board: The Contributions of Henderson, Porter, and Tinsley”. Models and Monetary Policy: Research in the Tradition of Dale Henderson, Richard Porter, and Peter Tinsley. 311Ð318. Washington, DC: Board of Governors of the Federal Reserve System, 2005. Kohn, Donald L. “Inflation Targeting in the United States? Comment”. The inflation-targeting debate. 337Ð350. NBER Studies in Business Cycles, vol. 32., 2005. Kohn, Donald L. “Inflation Targeting”. Federal Reserve Bank of St. Louis Review 86.4 (2004): 179Ð183. Kohn, Donald L. “Whither Central Banking?: Commentary”. Evolution and procedures in central banking. 82Ð88. Cambridge; New York and Melbourne:, 2003. Kohn, Donald L., and Brian P. Sack. “Central bank talk: does it matter and why?” (2003). Board of Governors of the Federal Reserve System (US), Finance and Economics Discussion Series: 2003Ð55. Kohn, Donald L. “Panel: Implications of Declining Treasury Debt: What Should the Federal Reserve Do as Treasury Debt Is Repaid?” Journal of Money, Credit, and Banking 34.3 (2002): 941Ð945. Kohn, Donald L. “Concluding Panel Discussion: The Role of Monetary Policy under Low Inflation”. Monetary and Economic Studies 19.(2001): 377Ð383. Kohn, Donald L. “Forward-Looking Rules for Monetary Policy: Comment”. Monetary policy rules. 192Ð199. NBER Conference Report series, 1999. Kohn, Donald L. “Independence and Accountability: Comments”. Towards more effective monetary policy. 330Ð334. New York: 1997. Kohn, Donald L. “Measuring the Adjusted Monetary Base in an Era of Financial Change: Commentary”. Federal Reserve Bank of St. Louis Review 78.6 (1996): 45Ð49. cobber Pack: U PL: COE1 [O] Processed: [16-06-2011 09:30] Job: 012364 Unit: PG01 Source: /MILES/PKU/INPUT/012364/012364_w002_MP 02 - Don Kohn - Curriculum Vitae.xml

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Kohn, Donald L. “Commentary: What Operating Procedures Should Be Adopted to Maintain Price Stability?—Practical Issues”. Achieving price stability: A symposium sponsored by the Federal Reserve Bank of Kansas City, Jackson Hole, Wyoming, August 29Ð31, 1996. 297Ð306. Kansas City:, 1996. Kohn, Donald L. “Inflation Indicators and Inflation Policy: Comment”. NBER macroeconomics annual 1995. 227Ð233. Cambridge and London, 1995. Kohn, Donald L. “Monetary Aggregates Targeting in a Low-Inflation Economy: Discussion”. Goals, guidelines, and constraints facing monetary policymakers: Proceedings of a conference held at North Falmouth, Massachusetts, June 1994. 130Ð135. Conference Series, no. 38., 1994. Kohn, Donald L. “Commentary: The Role of Judgment and Discretion in the Conduct of Monetary Policy”. Changing capital markets: Implications for monetary policy: A symposium sponsored by the Federal Reserve Bank of Kansas City, Jackson Hole, Wyoming, August 19Ð21, 1993. 197Ð203. Kansas City, 1993. Kohn, Donald L. “Evaluating Policy Regimes: New Research in Empirical Macroeconomics: Comments”. Evaluating policy regimes: New research in empirical macroeconomics. 452Ð457. Washington, DC:, 1993. Testimonies (2005Ð2010) (http://www.federalreserve.gov/): Federal Reserve independence Before the Subcommittee on Domestic Monetary Policy and Technology, Committee on Financial Services, US House of Representatives, Washington, DC 9 July 2009. American International Group Before the Committee on Banking, Housing, and Urban Affairs, US Senate, Washington, DC 5 March 2009. Troubled Asset Relief Program Before the Committee on Financial Services, US House of Representatives, Washington, DC 13 January 2009. Risk management and its implications for systemic risk Before the Subcommittee on Securities, Insurance, and Investment, Committee on Banking, Housing, and Urban Affairs, US Senate 19 June 2008. Condition of the banking system Before the Committee on Banking, Housing, and Urban Affairs, US Senate 5 June 2008. Condition of the US banking system Before the Committee on Banking, Housing, and Urban Affairs, US Senate 4 March 2008. Industrial loan companies Before the Committee on Financial Services, US House of Representatives 25 April 2007. The aging workforce Before the Special Committee on Aging, US Senate 28 February 2007. Nomination as Vice Chairman to the Board Before the Committee on Banking, Housing, and Urban Affairs, US Senate 8 June 2006. Regulatory relief Before the Committee on Banking, Housing, and Urban Affairs, United States Senate 1 March 2006. Regulatory relief Before the Subcommittee on Financial Institutions and Consumer Credit, Committee on Financial Services, US House of Representatives 9 June 2005.

Speeches (2005–10) (Federal Reserve Board website http://www.federalreserve.gov/): The Federal Reserve's Policy Actions during the Financial Crisis and Lessons for the Future At the Carleton University, Ottawa, Canada 13 May 2010. Global Imbalances At the High-Level Conference on the International Monetary System, Zurich, Switzerland 11 May 2010. The Economic Outlook At the Federal Reserve Bank of San Francisco Community Leaders Luncheon, San Francisco, California 8 April 2010. Homework Assignments for Monetary Policymakers At the Cornelson Distinguished Lecture at Davidson College, Davidson, North Carolina 24 March 2010. Focusing on Bank Interest Rate Risk Exposure At the Federal Deposit Insurance Corporation's Symposium on Interest Rate Risk Management, Arlington, Virginia 29 January 2010. Monetary Policy in the Crisis: Past, Present, and Future At the Brimmer Policy Forum, American Economic Association Annual Meeting, Atlanta, Georgia 3 January 2010. International Perspective on the Crisis and ResponseAt the Federal Reserve Bank of Boston 54th Economic Conference, Chatham, Massachusetts 23 October 2009. The Economic Outlook At the National Association for Business Economics, St. Louis, Missouri 13 October 2009. cobber Pack: U PL: COE1 [E] Processed: [16-06-2011 09:30] Job: 012364 Unit: PG01 Source: /MILES/PKU/INPUT/012364/012364_w002_MP 02 - Don Kohn - Curriculum Vitae.xml

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Monetary Policy Research and the Financial Crisis: Strengths and Shortcomings At the Federal Reserve Conference on Key Developments in Monetary Policy, Washington, DC 9 October 2009. Central Bank Exit Policies At the Cato Institute's Shadow Open Market Committee Meeting, Washington, DC 30 September 2009. Comments on “Financial Intermediation and the Post-Crisis Financial System” At the Eighth BIS Annual Conference 2009, Financial System and Macroeconomic Resilience: Revisited, Basel, Switzerland 10 July 2009. Interactions between Monetary and Fiscal Policy in the Current Situation At the Conference on Monetary- Fiscal Policy Interactions, Expectations, and Dynamics in the Current Economic Crisis, Princeton University, Princeton, New Jersey 23 May 2009. The Economic Outlook At the Hutchinson Lecture, Newark, Delaware 20 April 20 2009. Monetary Policy in the Financial Crisis At the Conference in Honor of Dewey Daane, Nashville, Tennessee 18 April 2009. Policies to Bring Us Out of the Financial Crisis and Recession At the Forum on Great Decisions in the Economic Crisis, College of Wooster, Wooster, Ohio 3 April 2009. Restoring Financial Intermediation by Banks: The Role of Regulators At the Office of Thrift Supervision National Housing Forum, Washington, DC 8 December 2008. Monetary Policy and Asset Prices Revisited At the Cato Institute's 26th Annual Monetary Policy Conference, Washington, DC 19 November 2008. Productivity and Innovation in Financial Services At the Official Celebration of the 10th Anniversary of the Banque Centrale du Luxembourg, Luxembourg, Luxembourg 12 November 2008. Economic Outlook At the Georgetown University Wall Street Alliance, New York, New York 15 October 2008. Comments on “Financial Regulation in a System Context,” “Beyond Leveraged Losses: The Balance Sheet Effects of the Home Price Downturn,” and “The Central Role of House Prices in the Financial Crisis: How Will the Market Clear?”, At the Brookings Panel on Economic Activity, Washington, DC, 11 September 2008. Global Economic Integration and Decoupling at the International Research Forum on Monetary Policy, Frankfurt, Germany, 26 June 2008. Lessons for Central Bankers from a Phillips Curve Framework at the Federal Reserve Bank of Boston's 53rd Annual Economic Conference, Chatham, Massachusetts, 11 June 2008. Money Markets and Financial Stability at the Federal Reserve Bank of New York and Columbia Business School Conference on the Role of Money Markets, New York, New York. 29 May 2008. The Economic Outlook at the National Conference on Public Employee Retirement Systems Annual Conference, New Orleans, Louisiana, 20 May 2008. The Changing Business of Banking: Implications for Financial Stability and Lessons from Recent Market Turmoil at the Federal Reserve Bank of Richmond's Credit Market Symposium, Charlotte, North Carolina, 17 April 2008. Dedication remarks at the Dedication of the New Seattle Branch Building of the Federal Reserve Bank of San Francisco, Renton, Washington, 7 April 2008. Implications of Globalization for the Conduct of Monetary Policy at the International Symposium of the Banque de France, Paris, France, 7 March 2008. The US Economy and Monetary Policy at the University of North Carolina at Wilmington, Cameron School of Business' Business Week Program, Wilmington, North Carolina, 26 February 2008. Recent and Prospective Developments in Monetary Policy Transparency and Communications: A Global Perspective at the National Association for Business Economics Session, Allied Social Science Associations Annual Meeting, New Orleans, Louisiana, 5 January 2008. Expertise and Macroeconomic Policy, Comments on “Insiders versus Outsiders in Monetary Policy- Making,” by Timothy Besley, Neil Meads, and Paolo Surico at the American Economic Association Session, Allied Social Science Associations Annual Meeting, New Orleans, Louisiana, 4 January 2008. Financial Markets and Central Banking, C. Peter McColough Series on International Economics, Council on Foreign Relations, New York, New York, 28 November 2007. John Taylor Rules at the Conference on John Taylor's Contributions to Monetary Theory and Policy, Federal Reserve Bank of Dallas, Dallas, Texas, 12 October 2007. cobber Pack: U PL: COE1 [O] Processed: [16-06-2011 09:30] Job: 012364 Unit: PG01 Source: /MILES/PKU/INPUT/012364/012364_w002_MP 02 - Don Kohn - Curriculum Vitae.xml

Treasury Committee: Evidence Ev 13

Economic Outlook at the Greater Philadelphia Chamber of Commerce 207th Annual Meeting, Philadelphia, Pennsylvania, 5 October 2007. Success and Failure of Monetary Policy since the 1950s at Monetary Policy over Fifty Years, a conference to mark the fiftieth anniversary of the Deutsche Bundesbank, Frankfurt, Germany, 21 September 2007. Financial stability and policy issues at the Federal Reserve Bank of Atlanta's 2007 Financial Markets Conference, Sea Island, Georgia, 16 May 2007. Asset-Pricing Puzzles, Credit Risk, and Credit Derivatives at the Conference on Credit Risk and Credit Derivatives, Washington, DC, 22 March 2007. Comments on “Understanding the Evolving Inflation Process” by Cecchetti, Hooper, Kasman, Schoenholtz, and Watson at the US Monetary Policy Forum, Washington, DC, 9 March 2007. Financial Stability: Preventing and Managing Crises at the Exchequer Club Luncheon, Washington, DC, 21 February 2007. The Economic Outlook at the Atlanta Rotary Club, Atlanta, Georgia, 8 January 2007. Monetary Policy and Uncertainty at the Fourth Conference of the International Research Forum on Monetary Policy, Washington, DC, 1 December 2006. The Evolving Role of the Federal Reserve Banks at the American Bar Association, Banking Law Section, Washington, DC, 3 November 2006. Economic Outlook at the Money Marketeers of New York University, New York, New York, 4 October 2006. Evolution of Retail Payments and the Role of the Federal Reserve at the Western Payments Alliance 2006 Payments Symposium, Las Vegas, Nevada, 11 September 2006. Evolution of Retail Payments and the Role of the Federal Reserve at the Western Payments Alliance 2006 Payments Symposium, Las Vegas, Nevada, 11 September 2006. The Effects of Globalization on Inflation and Their Implications for Monetary Policy at the Federal Reserve Bank of Boston's 51st Economic Conference, Chatham, Massachusetts, 16 June 2006. The Evolving Nature of the Financial System: Financial Crises and the Role of the Central Bank at the Conference on New Directions for Understanding Systemic Risk, New York, New York, 18 May 2006. Investing in Payment Innovations: A Federal Reserve Perspective at the 2006 Payments Conference, Federal Reserve Bank of Chicago, Chicago, Illinois, 11 May 2006. Business Capital Spending at the Forecasters Club of New York Luncheon, New York, New York, 27 April 2006. Economic outlook at the Bankers and Business Leaders Luncheon, Federal Reserve Bank of Kansas City, Oklahoma City Branch, Oklahoma, 13 April 2006. Monetary policy and asset prices at “Monetary Policy: A Journey from Theory to Practice,” a European Central Bank Colloquium held in honor of Otmar Issing, Frankfurt, Germany, 16 March 2006. “Crisis Prevention: The Known, The Unknown, and The Unknowable,” at the Wharton University of Pennsylvania KuU Conference, Boston, Massachusetts, (6 January 2006). “The Economic Outlook,” at the 2006 Global Economic and Investment Outlook Conference, Carnegie- Mellon University, Pittsburgh, Pennsylvania. “Globalization, Inflation, and Monetary Policy,” at the James R. Wilson Lecture Series, The College of Wooster, Wooster, Ohio. “Inflation Modeling: A Policymaker's Perspective,” at the Quantitative Evidence on Price Determination Conference, Washington, DC. “Panel Discussion: Financial Markets, Financial Fragility, and Central Banking,” A Symposium Sponsored by the Federal Reserve Bank 0/Kansas City: The Greenspan Era: Lessons/or the Future, Jackson Hole, Wyoming, August 25Ð27, 2005, pp. 371Ð379 (2005). “Monetary Policy Perspectives on Risk Premiums in Financial Markets,” at the Financial Market Risk Premiums Conference, Federal Reserve Board, Washington, DC. “Managing Risk in a Changing Economic and Financial Landscape,” at the Banker's Association for Finance and Trade and Institute of International Bankers Conference, New York, New York. “Modeling Inflation: A Policymaker's Perspective,” to the International Research Forum on Monetary Policy Conference, Frankfurt am Main, Germany. “Imbalances in the US Economy,” at the 15th Annual Hyman P. Minsky Conference, The Levy Economics Institute of Bard College, Annandale-on-Hudson, New York; cobber Pack: U PL: COE1 [E] Processed: [16-06-2011 09:30] Job: 012364 Unit: PG01 Source: /MILES/PKU/INPUT/012364/012364_w002_MP 02 - Don Kohn - Curriculum Vitae.xml

Ev 14 Treasury Committee: Evidence

“Economic Outlook,” at the 2005 Conference of Twelfth District Directors, Federal Reserve Bank of San Francisco, San Francisco, California; posted on the Federal Reserve Board's website at www.tederalreserve.gov, (14 April 2005). “Central Bank Communication,” at the Annual Meeting of the American Economic Association, Philadelphia, Pennsylvania; posted on the Federal Reserve Board's website at wwwfederalreserve.gov, (9 January 2005). “Crisis Management: The Known, the Unknown, and the Unknowable,” at the WhartonSloanMercer Oliver Wyman Institute Conference, “Financial Risk Management in Practice,” Philadelphia, Pennsylvania. May 2011

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