Possible Solutions / Next Steps

Addressing TBTF by Shrinking Financial Institutions: An Initial Assessment
by Gary H. Stern and Ron Feldman
in Federal Reserve Bank of Minneapolis, May 2009

In this essay, the authors review concerns about the "make-them-smaller" reform. They recommend several interim steps to address TBTF that share some similarities with the make-them-smaller approach but do not have the same failings. Specifically, they support (1) imposing special deposit insurance assessments for TBTF banks to allow for spillover-...  

Aiding the Economy: What the Fed Did and Why
by Ben S. Bernanke
in Board of Governors, November 2010

Federal Reserve Chairman Bernanke's Op-ed column published in The Washington Post on November 4, 2010

Alt-A: The Forgotten Segment of the Mortgage Market
by Rajdeep Sengupta
in Federal Reserve Bank of St. Louis Review, January 2010

This study presents a brief overview of the Alt-A mortgage market with the goal of outlining broad trends in the different borrower and mortgage characteristics of Alt-A market originations between 2000 and 2006. The paper also documents the default patterns of Alt-A mortgages in terms of the various borrower and mortgage characteristics over th...  

Are All the Sacred Cows Dead? Implications of the Financial Crisis for Macro and Financial Policies
by Asli Demirgüç-Kunt and Luis Servén
in World Bank Policy Research Working Paper, January 2009

The recent global financial crisis has shaken the confidence of developed and developing countries alike in the very blueprint of financial and macro policies that underlie the western capitalist systems. In an effort to contain the crisis from spreading, the authorities in the US and many European governments have taken unprecedented steps of prov...  

As In the Past, Reform Will Follow Crisis
by James Bullard
in Federal Reserve Bank of St. Louis Regional Economist, July 2009

Historically, crises have led to significant legislation. The current financial crisis will undoubtedly spur further regulation. Successful regulation should be aimed not at preventing all failures, but rather at establishing a clear and credible process such that if a failure were to occur, it would take place in an orderly fashion and not cause i...  

Asset Bubbles and Systemic Risk
by Eric S. Rosengren
in Federal Reserve Bank of Boston Speech, March 2010

The Global Interdependence Center's Conference on "Financial Interdependence in the World's Post-Crisis Capital Markets" Philadelphia, Pennsylvania

An Autopsy of the U.S. Financial System: Accident, Suicide, or Negligent Homicide?
by Ross Levine
in Brown University Working Paper, April 2010

In this postmortem, I find that the design, implementation, and maintenance of financial policies during the period from 1996 through 2006 were primary causes of the financial system’s demise. The evidence is inconsistent with the view that the collapse of the financial system was caused only by the popping of the housing bubble and the herding ...  

Bank Capital: Lessons from the Financial Crisis
by Asli Demirguc-Kunt, Enrica Detragiache, Ouarda Merrouche
in World Bank Policy Research Working Paper, WPS5473, November 2010

Using a multi-country panel of banks, the authors study whether better capitalized banks fared better in terms of stock returns during the financial crisis.

Bank Exposure to Commercial Real Estate
by Yuliya Demyanyk and Kent Cherny
in Federal Reserve Bank of Cleveland Economic Trends, August 2009

As rising home foreclosures and delinquencies continue to undermine a financial and economic recovery, an increasing amount of attention is being paid to another corner of the property market: commercial real estate. This article discusses bank exposure to the commercial real estate market.

Bank Relationships and the Depth of the Current Economic Crisis
by Julian Caballero, Christopher Candelaria, and Galina Hale
in Federal Reserve Bank of San Francisco Economic Letter, December 2009

The financial crisis has been worldwide in scope, but the severity has differed from country to country. Those countries whose banks played a more central role in the global financial system, were important intermediaries, or had extensive direct relationships tended to be less seriously affected, as measured by the extent of the decline in their s...  

Bankers Acceptances and Unconventional Monetary Policy: FAQs
by Richard G. Anderson
in Federal Reserve Bank of St. Louis Economic Synopses, March 2009

An expansion and FAQ following on an earlier article ("Bankers Acceptances: Yesterday's Instrument to Re-Start Today's Credit Markets?"). Describes possible implementation of a Banker's Acceptances program at the Federal Reserve.

Bankers’ Acceptances: Yesterday’s Instrument to Restart Today's Credit Markets?
by Richard G. Anderson
in Federal Reserve Bank of St. Louis Economic Synopses, January 2009

This note suggests considering an old—not new—financial market instrument: bankers’ acceptances. Bankers’ acceptances are one of the world’s older financial instruments, used as early as the twelfth century. Bankers’ acceptances have a long history in the Federal Reserve. Bankers’ acceptances are an old idea whose time may have returned—but with c...  

Buying Troubled Assets
by Lucian A. Bebchuk
in Harvard Law and Economics Discussion Paper (via SSRN), April 2009

This paper analyzes how government intervention in the market for banks’ troubled assets is best designed, and also uses this analysis to evaluate the public-private investment program announced by the U.S. government in March 2009. The author begins by presenting the case for using government funds to restart the market for troubled assets. He the...  

Can Monetary Policy Affect GDP Growth?
by Yi Wen
in Federal Reserve Bank of St. Louis Economic Synopses, April 2009

Discusses whether the growth of the monetary base is associated with gaster growth of real output.

Central Bank Response to the 2007-08 Financial Market Turbulence: Experiences and Lessons Drawn
by Alexandre Chailloux, Simon Gray, Ulrich Klüh, Seiichi Shimizu, and Peter Stella
in IMF Working Paper, September 2008

The paper reviews the policy response of major central banks during the 2007–08 financial market turbulence and suggests that there is scope for convergence among central bank operational frameworks through the adoption of those elements that proved most instrumental in calming markets. These include (i) rapid liquidity provision to a broad rang...  

Challenges for monetary policy in EMU
by Axel Weber
in Homer Jones Memorial Lecture, April 2011

Bundesbank President discussed the financial crisis and its lessons for monetary policy in a lecture at the St. Louis Fed.

The Changing Nature of Financial Intermediation and the Financial Crisis of 2007-09
by Tobias Adrian and Hyun Song Shin
in Federal Reserve Bank of New York Staff Reports, March 2010

The financial crisis of 2007-09 highlighted the changing role of financial institutions and the growing importance of the “shadow banking system,” which grew out of the securitization of assets and the integration of banking with capital market developments. This trend was most pronounced in the United States, but it also had a profound influence o...  

Commercial Bank Lending Data during the Crisis: Handle with Care
by Silvio Contessi and Hoda El-Ghazaly,
in Federal Reserve Bank of St. Louis Economic Synopses, August 2009

A discussion of commercial bank lending data, inferences that can be drawn from the data, and some caveats about the data.

The Commercial Paper Market, the Fed, and the 2007-2009 Financial Crisis
by Richard G. Anderson and Charles S. Gascon
in Federal Reserve Bank of St. Louis Review, November 2009

Since its inception in the early nineteenth century, the U.S. commercial paper market has grown to become a key source of short-term funding for major businesses, with issuance averaging over $100 billion per day. In the fall of 2008, the commercial paper market achieved national prominence when increasing market stress caused some to fear that,...  

Confronting Too Big to Fail
by Daniel K. Tarullo
in Speech, Board of Governors, October 2009

Tarullo suggests that the reform process cannot be judged a success unless it substantially reduces systemic risk generally and, in particular, the too-big-to-fail problem. This speech addresses the task of forging an effective response to this problem

The Consolidation of Financial Market Regulation: Pros, Cons, and Implications for the United States
by Sabrina R. Pellerin, John R. Walter, and Patricia E. Wescott
in Federal Reserve Bank of Richmond Working Paper, May 2009

The U.S. financial system has changed significantly over the last several decades without any major structural changes to the decentralized financial regulatory system, despite numerous proposals. In the past decade, many countries have chosen to consolidate their regulators into a newly formed "single regulator" or have significantly reduced the n...  

Conventional and Unconventional Monetary Policy
by Vasco Cúrdia and Michael Woodford
in Federal Reserve Bank of New York Staff Reports, November 2009

We extend a standard New Keynesian model both to incorporate heterogeneity in spending opportunities along with two sources of (potentially time-varying) credit spreads and to allow a role for the central bank’s balance sheet in determining equilibrium. We use the model to investigate the implications of imperfect financial intermediation for famil...  

Cracks in the System: Repairing the Damaged Global Economy
by Olivier Blanchard
in International Monetary Fund: Finance and Development, December 2008

The financial crisis has exposed weaknesses in the current regulatory and supervisory frameworks, which have made clear that action is needed to reduce the risk of crises and to address them when they occur.

Credible Alertness Revisited
by Jean-Claude Trichet
in Federal Reserve Bank of Kansas City Symposium, August 2009

A discussion of three issues facing central banks: the relationship between asset prices and monetary policy; the effectiveness of the standard interest rate instrument; and the design of non-standar monetary policy measures such as the ECB's enhanced credit support.

The Credit Crisis and Cycle Proof Regulation
by Raghuram G. Rajan
in Federal Reserve Bank of St. Louis Review, September 2009

Rajan offers what he called "cycle proof regulation" to help head off a future crisis. Among other things, he proposed: -Highly leveraged financial institutions would be required to buy fully collateralized insurance. This insurance would inject contingent capital into those institutions when they're in trouble. -Financial institutions considered...  

The Credit Crisis: Conjectures about Causes and Remedies
by Douglas W. Diamond and Raghuram G. Rajan
in AEA Presentation Paper, December 2008

What caused the financial crisis that is sweeping across the world? What keeps asset prices and lending depressed? What can be done to remedy matters? While it is too early to arrive at definite answers to these questions, the focus of this paper is to offer offer informed conjectures.

The Credit Crunch of 2007-2008: A Discussion of the Background, Market Reactions, and Policy Responses
by Paul Mizen
in Federal Reserve Bank of St. Louis Review, September 2008

This paper discusses the events surrounding the 2007-08 credit crunch. It highlights the period of exceptional macrostability, the global savings glut, and financial innovation in mortgage-backed securities as the precursors to the crisis. The credit crunch itself occurred when house prices fell and subprime mortgage defaults increased. These event...  

Credit Derivatives: Systemic Risks and Policy Options
by John Kiff, Jennifer Elliott, Elias Kazarian, Jodi Scarlata, and Carolyne Spackman
in IMF Working Paper, November 2009

Credit derivative markets are largely unregulated, but calls are increasingly being made for changes to this “hands off” stance, amidst concerns that they helped to fuel the current financial crisis, or that they could be a cause of the next one. The purpose of this paper is to address two basic questions: (i) do credit derivative markets increase ...  

The Crisis
by Alan Greenspan
in Brookings Papers on Economic Activity, April 2010

To prevent a future financial crisis, the primary imperative must be increased regulatory capital and liquidity requirements on banks and significant increases in collateral requirements for globally traded financial products, irrespective of the financial institutions making the trades, Greenspan says. He offers his views about regulatory reform,...  

The Curious Case of the U.S. Monetary Base
by Richard G. Anderson
in Federal Reserve Bank of St. Louis Regional Economist, July 2009

Recent increases in the monetary base are far greater than any previously in American history, surely a "noble experiment" in policymaking. Whether these policies can succeed—and without accelerating inflation—remains to be seen.

The Dependence of the Financial System on Central Bank and Government Support
by Petra Gerlach
in BIS Quarterly Review, March 2010

How much does the banking sector depend on public support? Utilisation of many support facilities has declined, due mainly to a fall in demand. Supply factors play a smaller, but not insignificant role, as governments and central banks have tightened the conditions on which certain support measures are available or have phased them out entirely. Ho...  

Do Central Bank Liquidity Facilities
by Jens H. E. Christensen, Jose A. Lopez, and Glenn D. Rudebusch
in Federal Reserve Bank of San Francisco Working Paper, June 2009

In response to the global financial crisis that started in August 2007, central banks provided extraordinary amounts of liquidity to the financial system. To investigate the effect of central bank liquidity facilities on term interbank lending rates, the authors estimate a six-factor arbitrage-free model of U.S. Treasury yields, financial corporate...  

Emerging from the Crisis: Where Do We Stand?
by Ben S. Bernanke
in Board of Governors Speech, November 2010

Speech by Federal Reserve Chairman at the Sixth European Central Bank Central Banking Conference, Frankfurt, Germany

Factors Affecting Efforts to Limit Payments to AIG Counterparties
by Thomas C. Baxter Jr.
in Federal Reserve Bank of New York, February 2010

Testimony before the Committee on Government Oversight and Reform, U.S. House of Representatives

The Fed at a Crossroads
by James Bullard
in Federal Reserve Bank of St. Louis Speech, March 2010

Remarks at St. Cloud State University's 48th annual Winter Institute

Fed Confronts Financial Crisis by Expanding Its Role as Lender of Last Resort
by John V. Duca, Danielle DiMartino and Jessica J. Renier
in Federal Reserve Bank of Dallas Economic Letter, February 2009

The unprecedented actions the Fed has taken to combat the financial crisis have had some success in unclogging the economy's financial arteries, according to this article.

The Fed's Expanded Balance Sheet
by Brian P. Sack
in Federal Reserve Bank of New York Speech, December 2009

The Fed’s balance sheet has moved to the forefront of its policy efforts. Accordingly, to understand the policy choices that lie ahead for the Federal Reserve, one has to understand how the balance sheet got to where it is and what effects it has had on financial markets.

The Federal Reserve Bank of New York's Involvement with AIG
by Thomas C. Baxter and Sarah J. Dahlgren
in Federal Reserve Bank of New York, May 2010

Joint written testimony of Thomas C. Baxter and Sarah Dahlgren before the Congressional Oversight Panel, Washington, D.C.

Federal Reserve Liquidity Programs: An Update
by Niel Willardson and LuAnne Pederson
in The Region (Federal Reserve Bank of Minneapolis), June 2010

A review of the size, status and results of the Fed's programs to cope with crisis

The Federal Reserve's Asset Purchase Program
by Janet Yellen
in Speech at the The Brimmer Policy Forum, Allied Social Science Associations Annual Meeting, Denver, Colorado, January 2011

Yellen discusses the rationale for the decision by the Federal Open Market Committee (FOMC) in November 2010 to initiate a new program of asset purchases, and addresses questions (FAQs) regarding the program's economic and financial effects both in the U.S. and abroad.

The Federal Reserve's Balance Sheet: An Update
by Ben S. Bernanke
in Speech, Board of Governors, October 2009

Bernanke reviews the most important elements of the Federal Reserve's balance sheet, as well as some aspects of their evolution over time. With this, he explains the steps the Federal Reserve has taken, beyond conventional interest rate reductions, to mitigate the financial crisis and the recession, as well as how those actions will be reversed as ...  

The Federal Reserve's Liquidity Facilities
by William C. Dudley
in Speech, April 2009

Remarks at the Vanderbilt University Conference on Financial Markets and Financial Policy Honoring Dewey Daane, Nashville, Tennessee

The Federal Reserve's Policy Actions during the Financial Crisis and Lessons for the Future
by Donald L. Kohn
in Board of Governors Speech, May 2010

Speech at the Carleton University, Ottawa, Canada

The Federal Reserve’s Commercial Paper Funding Facility
by Tobias Adrian, Karin Kimbrough, and Dina Marchioni
in Federal Reserve Bank of New York Staff Reports, January 2010

The Federal Reserve created the Commercial Paper Funding Facility (CPFF) in the midst of severe disruptions in money markets following the bankruptcy of Lehman Brothers on September 15, 2008. The CPFF finances the purchase of highly rated unsecured and asset-backed commercial paper from eligible issuers via primary dealers. The facility is a liquid...  

Financial Crises and Economic Activity
by Stephen G. Cecchetti, Marion Kohler and Christian Upper
in Federal Reserve Bank of Kansas City Symposium, August 2009

The authors use historical data to examine past systemic banking crises and compare them to the current crisis. They also look at the long-term effects of a crisis on economic output.

The Financial Crisis and the Recession: What is Happening and What the Government Should Do
by Robert E. Hall and Susan E. Woodward

Woodward and Hall frequently update a document on the crisis and recession. The highlights of the document are: Low interest rates in the early part of the decade were responsible monetary policy to head off deflation, not an irresponsible contribution to a housing price bubble. The most important fact about the economy today is the collapse of s...  

The Financial Crisis of 2008: What Needs to Happen after TARP
by Campbell R. Harvey
in Duke University Working Paper, October 2008

Harvey argues that the Trouble Asset Relief Program (TARP), signed into law on October 3, 2008, is an insufficient policy initiative to end the current credit crisis. In addition to modifications in implementing the program, other policy initiatives are necessary. Harvey sets forth several proposals to help end the crisis.

Fiscal Responsibility and Global Rebalancing
by Janet L. Yellen
in Federal Reserve Board of Governors, December 2010

Speech by Federal Reserve System Board of Governors Vice Chair at the Committee for Economic Development 2010 International Counterparts Conference, New York, New York .

Focusing on Bank Interest Rate Risk Exposure
by Donald L. Kohn
in Board of Governors Speech, January 2010

At the Federal Deposit Insurance Corporation's Symposium on Interest Rate Risk Management, Arlington, Virginia

The Future of Securities Regulation
by Luigi Zingales
in University of Chicago Working Paper, January 2009

The U.S. system of securities law was designed more than 70 years ago to regain investors’ trust after a major financial crisis. Today we face a similar problem. But while in the 1930s the prevailing perception was that investors had been defrauded by offerings of dubious quality securities, in the new millennium, investors’ perception is that they...  

Getting Back on Track: Macroeconomic Policy Lessons from the Financial Crisis
by John B. Taylor
in Federal Reserve Bank of St. Louis Review, May 2010

This article reviews the role of monetary and fiscal policy in the financial crisis and draws lessons for future macroeconomic policy. It shows that policy deviated from what had worked well in the previous two decades by becoming more interventionist, less rules-based, and less predictable. The policy implications are thus that policy should “g...  

Has the Recent Real Estate Bubble Biased the Output Gap?
by Chanont Banternghansa and Adrian Peralta-Alva
in Federal Reserve Bank of St. Louis Economic Synopses, December 2009

The authors offer a word of caution to policymakers: Policies based on point estimates of the output gap may not rest on solid ground.

The High Cost of Exceptionally Low Rates
by Thomas M. Hoenig
in Federal Reserve Bank of Kansas City, June 2010

Speech at Bartlesville Federal Reserve Forum

How Not to Reduce Excess Reserves
by David C. Wheelock
in Federal Reserve Bank of St. Louis Economic Synopses, August 2009

The author looks back to a simliar economic situation during the 1930s for insights into how to handle excess reserves.

Implementing a Macroprudential Approach to Supervision and Regulation
by Ben S. Bernanke
in Federal Reserve Board of Governors Speech, May 2011

Speech at the 47th Annual Conference on Bank Structure and Competition, Chicago, Illinois

Implications of the Financial Crisis for Economics
by Ben S. Bernanke
in Board of Governors Speech, September 2010

Speech at the Conference Co-sponsored by the Center for Economic Policy Studies and the Bendheim Center for Finance, Princeton University, Princeton, New Jersey

Implications of the Financial Crisis for Potential Growth: Past, Present, and Future
by Charles Steindel
in Federal Reserve Bank of New York Staff Reports, November 2009

The scale of the recent collapse in asset values and the magnitude of the recession suggest that activities connected to the increase in values over the 2002-07 period—notably, expansion of the financial markets, homebuilding, and real estate—were overstated. If this is true, aggregate U.S. economic growth would have been overstated, implying that ...  

Improving the International Monetary and Financial System
by Janet L. Yellen
in Speech at the Banque de France International Symposium, Paris, France, March 2011

In this speech Yellen contributes her thoughts on steps we can take to improve our international economic order. In the case of the recent global financial crisis and recession, she apportions responsibility to inadequacies in both the monetary and financial systems.

The Information Value of the Stress Test and Bank Opacity
by Stavros Peristiani, Donald P. Morgan, and Vanessa Savino
in Federal Reserve Bank of New York Staff Reports, no. 460, July 2010

We investigate whether the “stress test,” the extraordinary examination of the nineteen largest U.S. bank holding companies conducted by federal bank supervisors in 2009, produced information demanded by the market. Using standard event study techniques, we find that the market had largely deciphered on its own which banks would have capital ga...  

International Policy Response to the Financial Crisis
by Masaaki Shirakawa
in Federal Reserve Bank of Kansas City Symposium, August 2009

A discussion of the future of international coordination between central banks in the wake of the current financial crisis.

Is the Financial Crisis Over? A Yield Spread Perspective
by Massimo Guidolin and Yu Man Tam
in Federal Reserve Bank of St. Louis Economic Synopses, September 2009

Our finding is consistent with some recent, substantial volatility in the U.S. corporate bond market and leaves open a possibility that additional, future shocks to default premia may have long-lived effects.

It's Greek to Me
by Kevin Warsh
in Board of Governors Speech, June 2010

At the Atlanta Rotary Club, Atlanta, Georgia

The Lack of an Empirical Rationale for a Revival of Discretionary Fiscal Policy
by John B. Taylor
in AEA Presentation Paper, January 2009

Despite this widespread agreement of a decade ago, there has recently been a dramatic revival of interest in discretionary fiscal policy. The purpose of this paper is to review the empirical evidence during the past decade and determine whether it calls for such a revival. Taylor finds that it does not.

Lessons of the Crisis: The Implications for Regulatory Reform
by William C. Dudley
in Speech, Federal Reserve Bank of New York, January 2010

Remarks at the Partnership for New York City Discussion, New York City.

Liquidity Risk, Credit Risk, and the Federal Reserve’s Responses to the Crisis
by Asani Sarkar
in Federal Reserve Bank of New York Staff Reports, September 2009

In responding to the severity and broad scope of the financial crisis that began in 2007, the Federal Reserve has made aggressive use of both traditional monetary policy instruments and innovative tools in an effort to provide liquidity. In this paper, the author examines the Fed’s actions in light of the underlying financial amplification mechanis...  

The macroeconomics of financial crises: How risk premiums, liquidity traps and perfect traps affect policy options
by Manfred Gärtner und Florian Jung
in University of St. Gallen Discussion Paper, July 2009

The paper shows that structural models of the IS-LM and Mundell-Fleming variety have a lot to tell about the macroeconomics of the current global crisis. In addition to demonstrating how the emergence of risk premiums in money and capital markets may drive economies into recessions, it shows the following: (1) Liquidity traps may occur not only whe...  

Macroprudential Supervision of Financial Institutions: Lessons from the SCAP
by Beverly Hirtle, Til Schuermann, and Kevin Stiroh
in Federal Reserve Bank of New York Staff Reports, November 2009

A fundamental conclusion drawn from the recent financial crisis is that the supervision and regulation of financial firms in isolation—a purely microprudential perspective—are not sufficient to maintain financial stability. Rather, a macroprudential perspective, which evaluates and responds to the financial system as a whole, seems necessary, and t...  

The Mechanics of a Graceful Exit: Interest on Reserves and Segmentation in the Federal Funds Market
by Morten L. Bech and Elizabeth Klee
in Federal Reserve Bank of New York Staff Reports, December 2009

To combat the financial crisis that intensified in the fall of 2008, the Federal Reserve injected a substantial amount of liquidity into the banking system. The resulting increase in reserve balances exerted downward price pressure in the federal funds market, and the effective federal funds rate began to deviate from the target rate set by the Fed...  

Monetary Policy Research and the Financial Crisis: Strengths and Shortcomings
by Donald L. Kohn
in Speech, Board of Governors, October 2009

Kohn, in his speech, asks "What aspects of the existing literature in monetary economics have been particularly helpful in formulating the course of monetary policy since the onset of the financial crisis? Second, what are the gaps in this literature that have become particularly evident since the onset of the financial crisis and, therefore, would...  

Monetary Policy Stance: The View from Consumption Spending
by William T. Gavin
in Federal Reserve Bank of St. Louis Economic Synopses, October 2009

The author suggests that we should expect a third business cycle in succession in which the real federal funds rate reaches its trough well after the economy begins to recover

Mortgage Choice and the Pricing of Fixed-Rate and Adjustable-Rate Mortgages
by John Krainer
in Federal Reserve Bank of San Francisco Economic Letter, February 2010

In the United States throughout 2009, the share of adjustable-rate mortgages among total mortgage originations was very low, apparently reflecting the attractive pricing of fixed-rate mortgages relative to ARMs. Government policy could have changed the relative attractiveness of the fixed-rate mortgages and ARMs, thereby shifting the market share o...  

Negating the Inflation Potential of the Fed’s Lending Programs
by Daniel L. Thornton
in Federal Reserve Bank of St. Louis Economic Synopses, July 2009

The Term Auction Facility (TAF), instituted in December 2007, was the first in a series of Fed lending facilities designed to allocate credit (and thus liquidity) to certain institutions and markets. The most recent of these lending facilities is the Term Asset-Backed Securities Loan Facility (TALF), which began operation in March 2009. Initiall...  

The New Shape of the Economic and the Financial Governance in the EU
by Olli Rehn
in Institute of International Finance, October 2010

Keynote Speech by EU Economic & Monetary Affairs Commissioner at The Annual Meeting Institute of International Finance

On the Record with Bernanke
in PBS NewsHour Forum, July 2009

At a forum in Kansas City, Mo., Federal Reserve Chairman Ben Bernanke discussed the central bank's actions in handling the economic crisis, saying he did not want to be the Fed chief who "presided over the second Great Depression." Here is the full transcript of the forum, which was moderated by Jim Lehrer.

Overview: Global Financial Crisis Spurs Unprecedented Policy Actions
by Ingo Fender and Jacob Gyntelberg
in BIS Quarterly Review, December 2008

A four-stage overview of the crisis. Market developments over the period under review went through four more or less distinct stages. Stage one, which led into the Lehman bankruptcy in mid-September, was marked by the takeover of two major US housing finance agencies by the authorities in the United States. Stage two encompassed the immediate impl...  

Paradise Lost: Addressing ‘Too Big to Fail’ (With Reference to John Milton and Irving Kristol)
by Richard W. FIsher
in Remarks before the Cato Institute’s 27th Annual Monetary Conference, November 2009

"In the words of Milton, I would say that regulation should be designed to enable financial institutions to be 'sufficient to have stood, though free to fall.'"

A Plan for Addressing the Financial Crisis
by Lucian A. Bebchuk
in Harvard Law School Working Paper, September 2008

This paper critiques the proposed emergency legislation for spending $700 billion on purchasing financial firms’ troubled assets to address the 2008 financial crisis. It also puts forward an alternative for advancing the two goals of the proposed legislation – restoring stability to the financial markets and protecting taxpayers.

Preventing Future Crises
by Noel Sacasa
in International Monetary Fund: Finance and Development, December 2008

This article takes a look at substantive issues in the current debates on reforming the financial sector. The first section identifies crucial weaknesses that the reforms need to address, and the second outlines key areas for policy action.

The Public Policy Case for a Role for the Federal Reserve in Bank Supervision and Regulation
by Ben S. Bernanke
in Board of Governors, January 2010

The Board's views on the importance of the Federal Reserve's continued role in bank supervision and regulation. The document discusses (1) how the expertise and information that the Federal Reserve develops in the making of monetary policy enable it to make a unique contribution to an effective regulatory regime, especially in the context of a more...  

Questions about Fiscal Policy: Implications from the Financial Crisis of 2008-2009
by N. Gregory Mankiw
in Federal Reserve Bank of St. Louis Review, May 2010

This article is a modified version of remarks given at the Federal Reserve Bank of Philadelphia’s policy forum “Policy Lessons from the Economic and Financial Crisis,” December 4, 2009.

Rebalancing the Global Recovery
by Ben S. Bernanke
in Board of Governors, November 2010

Speech by the Federal Reserve Chairman at the Sixth European Central Bank Central Banking Conference, Frankfurt, Germany

Reflections on a Year of Crisis
by Ben S. Bernanke
in Federal Reserve Bank of Kansas City Symposium, August 2009

The opening remarks at the Jackson Hole conference, "Financial Stability and Macroeconomic Policy"

Regulating Systemic Risk
by Governor Daniel K. Tarullo
in Speech at the 2011 Credit Markets Symposium, Charlotte, North Carolina, March 2011

This speech addresses the implementation of the new statutory regime for special supervision and regulation of financial institutions whose stress or failure could pose a risk to financial stability.

The Regulatory Response to the Financial Crisis: An Early Assessment
by Jeffrey M. Lacker
in The Institute for International Economic Policy and the International Monetary Fund Institute, May 2010

Assessment of the regulatory response to this crisis will depend predominantly on how well it clarifies and places discernable boundaries around the federal financial safety net.

Remarks on "The Squam Lake Report: Fixing the Financial System"
by Ben S. Bernanke
in Board of Governors Speech, June 2010

At the Squam Lake Conference, New York, New York

Report on the Lessons Learned from the Financial Ccrisis with Regard to the Functioning of European Financial Market Infrastructures
by European Central Bank
in European Central Bank, April 2010

This report considers issues relating to the impact of the financial crisis on the functioning of European financial market infrastructures (FMIs), including systemically important payment systems, central counter parties, and securities settlement systems.

Resolution Process for Financial Companies that Pose Systemic Risk to the Financial System and Overall Economy
by Thomas M. Hoenig, Charles S. Morris, and Kenneth Spong
in Federal Reserve Bank of Kansas City Speech, September 2009

The Under current law, financial regulators do not have the authority to resolve financial holding companies and non-depository financial companies that are in default or serious danger of default as they have with depository institutions. Although the normal bankruptcy process is a very effective process for most non-depository financial companie...  

The Response of the Federal Reserve to the Recent Banking and Financial Crisis
by Randall S. Kroszner and William Melick
in Chicago Booth School of Business Working Paper, December 2009

The authors present an account of the policy actions taken by the Fed, providing a narrative that brings together information that otherwise requires consulting a variety of sources. They also present a framework for thinking about the central bank policy response that gives the reader a means of organizing her own understanding of the response. A...  

Rethinking Capital Regulation
by Anil K. Kashyap, Raghuram G. Rajan and Jeremy C. Stein
in Federal Reserve Bank of Kansas City's Symposium: Maintaining Stability in a Changing Financial System, September 2008

Recent estimates suggest that U.S. banks and investment banks may lose up to $250 billion from their exposure to residential mortgages securities. The resulting depletion of capital has led to unprecedented disruptions in the market for interbank funds and to sharp contractions in credit supply, with adverse consequences for the larger economy. A n...  

Second Chances: Subprime Mortgage Modification and Re-Default
by Andrew Haughwout, Ebiere Okah, and Joseph Tracy
in Federal Reserve Bank of New York Staff Reports, December 2009

Mortgage modifications have become an important component of public interventions designed to reduce foreclosures. In this paper, we examine how the structure of a mortgage modification affects the likelihood of the modified mortgage re-defaulting over the next year. Using data on subprime modifications that precede the government’s Home Affordable...  

Securitization Markets and Central Banking: An Evaluation of the Term Asset-Backed Securities Loan Facility
by Sean Campbell, Daniel Covitz, William Nelson, and Karen Pence
in Finance & Economic Discussion Series, #2011-16, January 2011

This working paper studies the effects of the Term Asset-Backed Securities Loan Facility and finds that it lowered interest rate spreads for some categories of asset-backed securities but had little impact on the pricing of individual securities.

Seeking Stability: What's Next for Banking Regulation?
by Simona E. Cociuba
in Federal Reserve Bank of Dallas Economic Letter, April 2009

Cociuba reviews the Basel I regulatory framework, and then considers some of the improvements and shortcomings of Basel II. Cociuba then presents the example of Northern Rock to illustrate the shortcomings of Basel I, before considering what the future of bank regulation should look like.

Shadow Banking
by Zoltan Pozsar, Tobias Adrian, Adam Ashcraft, Hayley Boesky
in Federal Reserve Bank of New York Staff Reports no. 458, July 2010

This paper documents the origins, evolution and economic role of the shadow banking system. Its aim is to aid regulators and policymakers globally to reform, regulate and supervise the process of securitized credit intermediation in a market-based financial system.

The Shadow Banking System: Implications for Financial Regulation
by Tobias Adrian and Hyun Song Shin
in Federal Reserve Bank of New York Staff Report, July 2009

The current financial crisis has highlighted the growing importance of the “shadow banking system,” which grew out of the securitization of assets and the integration of banking with capital market developments. This trend has been most pronounced in the United States, but it has had a profound influence on the global financial system. In a market-...  

Slapped in the Face by the Invisible Hand: Banking and the Panic of 2007
by Gary B. Gorton
in SSRN Paper, May 2009

The 'shadow banking system' at the heart of the current credit crisis is, in fact, a real banking system – and is vulnerable to a banking panic. Indeed, the events starting in August 2007 are a banking panic. A banking panic is a systemic event because the banking system cannot honor its obligations and is insolvent. Unlike the historical banking p...  

Speculative Bubbles and Financial Crisis
by Pengfei Wang and Yi Wen
in Federal Reserve Bank of St. Louis Working Paper, July 2009

Why are asset prices so much more volatile and so often detached from their fundamental values? Why does the bursting of financial bubbles depress the real economy? This paper addresses these questions by constructing an in?nite-horizon heterogeneous agent general equilibrium model with speculative bubbles. We characterize conditions under which st...  

Still More Lessons from the Crisis
by William C. Dudley
in Federal Reserve Bank of New York Speech, December 2009

Remarks at the Columbia University World Leaders Forum, New York, New York

Structural Causes of the Global Financial Crisis: A Critical Assessment of the ‘New Financial Architecture’
by James Crotty
in University of Massachusetts Amherst Working Paper, August 2008

The main thesis of this paper is that the ultimate cause of the current global financial crisis is to be found in the deeply flawed institutions and practices of what is often referred to as the New Financial Architecture (NFA) – a globally integrated system of giant bank conglomerates and the so-called ‘shadow banking system’ of investment ban...  

The Success of the CPFF?
by Richard G. Anderson
in Federal Reserve Bank of St. Louis Economic Synopses, April 2009

Describes the Commercial Paper Funding Facility and its effect on the availability of commercial credit.

Systemic Risk and Deposit Insurance Premiums
by Viral V. Acharya, João A. C. Santos, and Tanju Yorulmazer
in Federal Reserve Bank of New York Economic Policy Review, October 2009

While systemic risk—the risk of wholesale failure of banks and other financial institutions—is generally considered to be the primary reason for supervision and regulation of the banking industry, almost all regulatory rules treat such risk in isolation. In particular, they do not account for the very features that create systemic risk in the first...  

Three Lessons for Monetary Policy from the Panic of 2008
by James Bullard
in Federal Reserve Bank of St. Louis Review, May 2010

This article is a modified version of a presentation given at the Federal Reserve Bank of Philadelphia’s policy forum “Policy Lessons from the Economic and Financial Crisis,” December 4, 2009.

Toward an Effective Resolution Regime for Large Financial Institutions
by Daniel K. Tarullo
in Board of Governors Speech, March 2010

At the Symposium on Building the Financial System of the 21st Century, Armonk, New York

The U.S. Financial System: Where We Have Been, Where We Are and Where We Need to Go
by William C. Dudley
in Federal Reserve Bank of New York Speech, February 2010

Remarks at the Reserve Bank of Australia's 50th Anniversary Symposium, Sydney, Australia

U.S. Monetary Policy and the Financial Crisis
by James R. Lothian
in Federal Reserve Bank of Atlanta CenFIS Working Paper, December 2009

This paper reviews U.S. Federal Reserve policy prior to and during the course of the recession that began in December 2007. It compares those policies to monetary policy during the Great Depression of the 1930s, with which this recession has been likened. The paper then discusses what policymakers will need to do to in future to avoid a surge in in...  

Uncertainty About When the Fed Will Raise Interest Rates
by Michael W. McCracken
in Federal Reserve Bank of St. Louis Economic Synopses, June 2009

In response to the current economic crisis, the Federal Reserve has reduced its federal funds rate (FFR) target to zero. With the FFR at zero and a negative rate practically infeasible, the Fed is now in largely uncharted territory when conducting monetary policy. Other types of policies are now the focus of attention.

United States: Financial System Stability Assessment
by The Monetary and Capital Markets and Western Hemisphere Departments of the International Monetary Fund
in International Monetary Fund, IMF Country Report No. 10/247, July 2010

A forceful policy response has rolled back systemic market pressures, but the cost of intervention has been high and stability is tenuous. Comprehensive reforms are being legislated, addressing many of the issues that left the system vulnerable. Given the severity of the crisis and the many weaknesses revealed, bolder action could have been envi...  

Using Monetary Policy to Stabilize Economic Activity
by Carl E. Walsh
in Federal Reserve Bank of Kansas City Symposium, August 2009

This essay examines the role of monetary policy in stabilizing real economic activity. The author discusses the consensus on monetary policy that developed over the last twenty years. He then examines monetary policy when the policy interest rate has fallen to zero. The paper also assess issues relevant for post-crisis monetary policy.

Valuing the Treasury’s Capital Assistance Program
by Paul Glasserman and Zhenyu Wang
in Federal Reserve Bank of New York Staff Reports, December 2009

The Capital Assistance Program (CAP) was created by the U.S. government in February 2009 to provide backup capital to large financial institutions unable to raise sufficient capital from private investors. Under the terms of the CAP, a participating bank receives contingent capital by issuing preferred shares to the Treasury combined with embedded ...  

A View of the Economic Crisis and the Federal Reserve’s
by Janet L. Yellen
in Federal Reserve Bank of San Francisco Economic Letter, July 2009

The Federal Reserve has responded to a severe recession by developing programs to bolster the financial system and restore economic growth. The Fed has the tools to unwind these programs when appropriate, maintaining price stability. The following is adapted from a speech delivered by the president and CEO of the Federal Reserve Bank of San Francis...  

What to Do about Systemically Important Financial Institutions
by James B. Thomson
in Federal Reserve Bank of Cleveland, August 2009

The Federal Reserve Bank of Cleveland is proposing a three-tiered system for regulating systemically important financial institutions. Tier one would include high-risk institutions, such as large, interstate banks and multi-state insurance companies. Tier two would include moderately complex financial institutions, such as larger regional banks. An...  

What's Under the TARP?
by Craig P. Aubuchon
in Federal Reserve Bank of St. Louis Economic Synopses, April 2009

This article provides an outline of the TARP plan and the Financial Stability Plan.

Where We Go from Here: The Crisis and Beyond
by Richard W. Fisher
in Federal Reserve Bank of Dallas Speech, March 2010

Remarks before the Eller College of Management, University of Arizona

Will Regulatory Reform Prevent Future Crises?
by James Bullard
in Federal Reserve Bank of St. Louis Speech, February 2010

Remarks at CFA Virginia Society, Richmond, Virginia

Will the U.S. Bank Recapitalization Succeed? Lessons from Japan
by Takeo Hoshi and Anil K. Kashyap
in NBER Working Paper, December 2008

The U.S. government is using a variety of tools to try to rehabilitate the U.S. banking industry. The two principal policy levers discussed so far are employing asset managers to buy toxic real estate securities and making bank equity purchases. Japan used both of these strategies to combat its banking problems. There are also a surprising number o...  

Would Quantitative Easing Sooner Have Tempered the Financial Crisis and Economic Recession?
by Daniel L. Thornton
in Federal Reserve Bank of St. Louis Economic Synopses, August 2009

The author examines the timing of the quantitative easing employed by the Federal Reserve.