The Squam Lake Report: Observations from two policy professionals

►The Squam Lake Report (SLR) contains a host of important recommendations to addressing the too-big-to-fail problem; the analysis offered in support of recommendations is sound and brings modern economics and finance to bear. ►We differ in emphasis with SLR on a few issues, including capital and living wills, but support moving forward with the core of SLR's recommendations even in these cases. ►Legislation (i.e., “Dodd-Frank”) seeking to fix the financial includes in one form or another the predominance of credible recommendations made to address TBTF, including the majority of those in SLR. The ultimate success of the legislation, however, depends on implementation. ►We hope the government focuses on a macroprudential regime that reduces fallout from financial spillovers, considers new efforts to measure and tax expected TBTF subsidies, and reconsiders aspects of Dodd-Frank that expand the safety net. ►Given the stakes, another SLR-caliber effort, this time centered on Dodd-Frank implementation, promises high returns.