Connectedness and contagion : protecting the financial system from panics / Hal S. Scott.

Format:

Book

Author/Creator:

Scott, Hal S., author.

Language:

English

Subjects (All):

Financial crises--History--21st century.

Financial crises.

Global Financial Crisis, 2008-2009--Government policy.

Global Financial Crisis, 2008-2009.

Physical Description:

1 online resource (439 p.) : illustrations

Place of Publication:

Cambridge, Massachusetts : The MIT Press, [2016]

Language Note:

English

Summary:

"The Dodd-Frank Act of 2010 was intended to reform financial policies in order to prevent another massive crisis such as the financial meltdown of 2008. Dodd-Frank is largely premised on the diagnosis that connectedness was the major problem in that crisis -- that is, that financial institutions were overexposed to one another, resulting in a possible chain reaction of failures. In this book, Hal Scott argues that it is not connectedness but contagion that is the most significant element of systemic risk facing the financial system. Contagion is an indiscriminate run by short-term creditors of financial institutions that can render otherwise solvent institutions insolvent. It poses a serious risk because, as Scott explains, our financial system still depends on approximately $7.4 to $8.2 trillion of runnable and uninsured short-term liabilities, 60 percent of which are held by nonbanks. Scott argues that efforts by the Federal Reserve, the FDIC, and the Treasury to stop the contagion that exploded after the bankruptcy of Lehman Brothers lessened the economic damage. And yet Congress, spurred by the public's aversion to bailouts, has dramatically weakened the power of the government to respond to contagion, including limitations on the Fed's powers as a lender of last resort. Offering uniquely detailed forensic analyses of the Lehman Brothers and AIG failures, and suggesting alternative regulatory approaches, Scott makes the case that we need to restore and strengthen our weapons for fighting contagion"--Provided by publisher.

Contents:

Acknowledgments

Introduction

1. The concept of connectedness

2. The concept and history of contagion

3. The concept of correlation

4. Asset connectedness : Lehman and AIG

5. Liability connectedness : money market funds and tri-party repo market

6. The Dodd-Frank Act policies to address connectedness

7. Contagion in the 2008 crisis : the run on the non-bank sector, "shadow banks"

8. History of lender of last resort in the United States

9. Dodd-Frank restrictions on the lender of last resort power

10. Comparison of LLR powers of fed with Bank of England, European Central Bank, and Bank of Japan

11. Strengthening the LLR powers of the fed

12. Liability insurance and guarantees

13. Insuring money market funds

14. Capital requirements : Basel III framework

15. Liquidity requirements

16. Bank resolution procedures, contingent capital (CoCos), and bail-ins

17. Dodd-Frank orderly liquidation for non-bank SIFIs (including bank holding companies)

18. Living wills

19. Money market mutual fund reform

20. Dependence of the financial system on short-term funding

21. Government crowding out of private issuance of short-term debt

22. Capital purchase program and other TARP support programs

23. Criticisms of bailouts generally

24. Specific criticism of TARP

25. Standing bailout programs

26. Conclusion

Notes

Index.

Notes:

Includes bibliographical references and index.

OCLC-licensed vendor bibliographic record.

ISBN:

9780262332163

0262332167

9780262332156

0262332159

OCLC:

949930490