Helmut Willke & Eva Becker 
Systemic Risk 
The Myth of Rational Finance and the Crisis of Democracy

1 Introduction: Systemic Risk Revisited-Steps to an Integrated Approach 7

2 Describing Systemic Risk 16

2.1 Basic Features of Systemic Risk 18

2.1.1 Systemic Risk as an Emergent Property of Global Finance 19

2.1.2 Types of Financial Systems 33

2.1.3 Definitions of Systemic Risk 43

3 The Myth of Rational Finance: A Review of Systemic Properties of Global Finance 48

3.1 System Governance 55

3.2 Overconfidence in Governance Capabilities 68

3.3 Learning Disabilities 77

3.3.1 Addiction to Success 77

3.3.2 Herding Behavior 81

3.3.3 Autism 83

4 Understanding Systemic Risk 88

4.1 An Economic Approach to Systemic Risk 88

4.2 A Political Approach to Systemic Risk 92

4.3 An Integrated Approach to Systemic Risk 101

5 Micro-Cases of Global Financial Governance Institutions 109

5.1 The FSB 110

5.2 The BCBS 112

5.3 A Critical Examination of the FSOC 115

5.3.1 The Shift to Macroprudential Regulation 118

5.3.2 Coordination and Designation: The FSOC 124

5.3.3 Data and Information: The OFR 140

5.3.4 Blaming and Shaming: The Systemic Risk Council 145

5.3.5 Taming the Beast, or: Does the FSOC Mitigate Systemic Risk? 147

5.3.6 Paradigm Shift or Cosmetic Enhancements? 164

5.4 An Early Assessment of the ESRB 168

5.4.1 Conceptual and Theoretical Perspectives 172

5.4.2 The ESRB and the New European Regulatory Architecture 191

5.4.3 Challenges of Post-Crisis Financial Regulatory Reform 195

5.4.4 Assessment and Outlook: Viable Legal Order Beyond the State? 206

5.4.5 Central Conclusions 208

6 What’s Democracy Got to Do with it-a Crisis of Democracy? 212

7 What’s Law Got to Do with it? 227

Appendix 235

References 248

Index 275