Law Commons^™

Insuring Against A Derivative Disaster: The Case For Decentralized Risk Management, Jeffrey Manns

GW Law Faculty Publications & Other Works

This Article makes the case for a decentralized risk management strategy for identifying and defusing future bubble markets. It suggests how the government can enlist private "gatekeeper guarantors" to provide integrated insurance and monitoring roles to complement the government’s management of systemic risks. It proposes the enactment of a federal mandate that systemically significant financial entities (or participants in systemically significant financial sectors) secure private guarantees to cover a percentage of their potential liabilities (above a loss threshold). Gatekeeper guarantors would act as “circuit breakers” of systemic risk by serving as self-interested monitors of risk taking and tying clients’ coverage …