Douglas J. Elliott, Fellow, The Brookings Institution: “The recent devastating global financial crisis has focused policymakers on sources of risk to the financial system that could have spillover effects on the economy as a whole. This search for “systemic risk” has ranged widely, going well beyond the banks that are at the heart of the financial system to include, among others: finance companies and other near-banks; insurers; financial utilities, such as clearing houses; various financial instruments such as derivatives and securitizations; financial market practices such as the use of repurchase agreements; and the asset management industry and its practices. This paper will explore systemic risk in the asset management industry and the appropriate response by US regulators. This is a particularly important area, given the huge volume of assets under management, estimated at as much as $53 trillion. Reference will be made from time to time to a report by the Office of Financial Research of the US Treasury Department (OFR) that was issued in September 2013 entitled Asset Management and Financial Stability. The Financial Stability Oversight Council (FSOC) had requested the OFR to study the asset management industry and its practices and their relationship to financial stability issues. The FSOC is a council of the top US financial regulators and is charged with watching over the stability of the US financial system. The Dodd-Frank Act that created the FSOC gave it, and the financial regulators that comprise it, very substantial authority to act to force changes that reduce systemic risk, if they believe it to be necessary. Choices made by the FSOC could have major effects on the asset management industry. Not surprisingly, the OFR report has gained considerable attention, despite its status as solely an initial background report for the FSOC’s use.”