Less than a decade later, however, these countercyclical tools failed to prevent unprecedented financial stress during the COVID-19 recession. This Article is the first legal scholarship to revisit the design of countercyclical rules in light of the COVID-19 pandemic. It reveals weaknesses in Dodd-Frank’s countercyclical approach and the significant costs of failing to implement an effective countercyclical strategy. The Article also establishes a blueprint for strengthening the United States’ countercyclical framework going forward. The Article identifies three principles—automaticity, portfolio strategy, and market-wide coverage—that should guide countercyclical policymaking. It then applies these principles to five specific areas in which financial regulators should bolster countercyclical oversight: bank capital requirements, accounting standards, securitization rules, early remediation guidelines, and margin requirements. Taken together, these reforms are critical to making countercyclical financial regulation work and creating a more stable and prosperous financial system.
Georgia Law Review