Fighting Crises / Gary Gorton, Guillermo Ordoñez.

Format:

Book

Author/Creator:

Gorton, Gary.

Contributor:

National Bureau of Economic Research.

Ordoñez, Guillermo.

Series:

Working Paper Series (National Bureau of Economic Research) no. w22787.

NBER working paper series no. w22787

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2016.

Summary:

In fighting a financial crisis, opacity (keeping the names of banks borrowing at emergency lending facilities secret) and stigma (the cost of having a bank's name revealed) are desirable to restore confidence. Lending facilities raise the perceived average quality of all banks' assets. Opacity reduces the costs of these facilities, creating an information externality that prevents runs even on banks not participating in lending facilities. Stigma is costly but keeps banks from revealing their participation, making opacity sustainable. The key tool for implementing optimal opacity while fine tuning stigma is the haircut for bonds offered as collateral in lending facilities.

Notes:

Print version record

October 2016.