As European leaders meet to decide the future of the Eurozone, Julie Chon argues in a new Atlantic Council – Bertelsmann Foundation issue brief that Europe must learn from the United States’ TARP experience, and match a sizeable bazooka with a clear and transparent process for markets to understand how financial mechanisms will work.
She points out in the brief, entitled, US Lessons for the Eurozone: Restoring Confidence through Transparency: “When it comes to resolving financial crises, size matters, but so does transparency… The race to meet the size test distracts policymakers from addressing the real impediment to restoring investor and public confidence: the inherent uncertainty and lack of transparency associated with extraordinary government actions in times of crisis.”
As Europe repeats the early mistakes of the United States in its response to the debt crisis, Chon argues that leaders must build TARP-like safety valves into existing and future bazookas to protect markets and the public against continued policy misfires.
Julie Chon is a Nonresident Senior Fellow with the Global Business and Economics Program at the Atlantic Council. She was senior policy advisor on the US Senate Committee on Banking, Housing and Urban Affairs from 2007 to 2011, crafting historic US policies to stabilize the financial system. Her extensive work included negotiations to enact laws governing the mortgage market/government-sponsored enterprises, TARP, IMF funding, exchange rates, sovereign fund investments, and financial regulation (Dodd-Frank Act). She advised on delegation visits with European and Asian leaders and high-profile hearings throughout the crisis, including Federal Reserve monetary policy hearings.