This paper empirically examines how capital affects a bank’s performance (survival and market share) and how this effect varies across banking crises, market crises, and normal times that occurred in ...the US over the past quarter century. We have two main results. First, capital helps small banks to increase their probability of survival and market share at all times (during banking crises, market crises, and normal times). Second, capital enhances the performance of medium and large banks primarily during banking crises. Additional tests explore channels through which capital generates these effects. Numerous robustness checks and additional tests are performed.
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GEOZS, IJS, IMTLJ, KILJ, KISLJ, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UL, UM, UPCLJ, UPUK
InFailure by Design, the Economic Policy Institute's Josh Bivens takes a step back from the acclaimed State of Working America series, building on its wealth of data to relate a compelling narrative ...of the U.S. economy's struggle to emerge from the Great Recession of 2008. Bivens explains the causes and impact on working Americans of the most catastrophic economic policy failure since the 1920s.
As outlined clearly here, economic growth since the late 1970s has been slow and inequitably distributed, largely as a result of poor policy choices. These choices only got worse in the 2000s, leading to an anemic economic expansion. What growth we did see in the economy was fueled by staggering increases in private-sector debt and a housing bubble that artificially inflated wealth by trillions of dollars. As had been predicted, the bursting of the housing bubble had disastrous consequences for the broader economy, spurring a financial crisis and a rise in joblessness that dwarfed those resulting from any recession since the Great Depression. The fallout from the Great Recession makes it near certain that there will be yet another lost decade of income growth for typical families, whose incomes had not been boosted by the previous decade's sluggish and localized economic expansion.
In its broad narrative of how the economy has failed to deliver for most Americans over much of the past three decades,Failure by Designalso offers compelling graphical evidence on jobs, incomes, wages, and other measures of economic well-being most relevant to low- and middle-income workers. Josh Bivens tracks these trends carefully, giving a lesson in economic history that is readable yet rigorous in its analysis. Intended as both a stand-alone volume and a companion to the newState of Working Americawebsite that presents all of the data underlying this cogent analysis,Failure by Designwill become required reading as a road map to the economic problems that confront working Americans.
Using a novel dataset, which merges good-level prices underlying the PPI with the respondents' balance sheets, we show that liquidity constrained firms increased prices in 2008, while their ...unconstrained counterparts cut prices. We develop a model in which firms face financial frictions while setting prices in customer markets. Financial distortions create an incentive for firms to raise prices in response to adverse financial or demand shocks. This reaction reflects the firms ' decisions to preserve internal liquidity and avoid accessing external finance, factors that strengthen the countercyclical behavior of markups and attenuate the response of inflation to fluctuations in output.
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BFBNIB, CEKLJ, INZLJ, IZUM, KILJ, NMLJ, NUK, ODKLJ, PILJ, PNG, SAZU, UL, UM, UPUK, ZRSKP
The recent financial crisis, with its origins in the collapse of the sub-prime mortgage boom and house price bubble in the USA, is a shown to have been a striking example of 'glocalisation', with ...distinctly locally varying origins and global consequences and feedbacks. The shift from a 'locally originate and locally-hold' model of mortgage provision to a securitised 'locally originate and globally distribute' model meant that when local subprime mortgage markets collapsed in the USA, the repercussions were felt globally. At the same time, the global credit crunch and the deep recession the global financial crisis precipitated have had locally varying impacts and consequences. Not only does a geographical perspective throw important light on the nature and dynamics of the recent financial meltdown, the latter in turn should give impetus for a more general research effort into the economic geography of bubbles and crashes.
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The world's best financial minds help us understand today's financial crisisWith so much information saturating the market for the everyday investor, trying to understand why the economic crisis ...happened and what needs to be done to fix it can be daunting. There is a real need, and demand, from both investors and the financial community to obtain answers as to what really happened and why.Lessons from the Financial Crisisbrings together the leading minds in the worlds of finance and academia to dissect the crisis. Divided into three comprehensive sections-The Subprime Crisis; The Global Financial Crisis; and Law, Regulation, the Financial Crisis, and The Future-this book puts the events that have transpired in perspective, and offers valuable insights into what we must do to avoid future missteps.Each section is comprised of chapters written by experienced contributors, each with his or her own point of view, research, and conclusionsExamines the market collapse in detail and explores safeguards to stop future crisesEncompasses the most up-to-date analysis from today's leading financial mindsWe currently face a serious economic crisis, but in understanding it, we can overcome the challenges it presents. This well-rounded resource offers the best chance to get through the current situation andlearn from our mistakes.
We are in the midst of the worst financial crisis since the Great Depression. This crisis is the latest phase of the evolution of financial markets under the radical financial deregulation process ...that began in the late 1970s. This evolution has taken the form of cycles in which deregulation accompanied by rapid financial innovation stimulates powerful financial booms that end in crises. Governments respond to crises with bailouts that allow new expansions to begin. As a result, financial markets have become ever larger and financial crises have become more threatening to society, which forces governments to enact ever larger bailouts. This process culminated in the current global financial crisis, which is so deeply rooted that even unprecedented interventions by affected governments have, thus far, failed to contain it. In this paper we analyse the structural flaws in the financial system that helped bring on the current crisis and discuss prospects for financial reform.
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The financial crisis has been blamed on reckless bankers, irrational exuberance, government support of mortgages for the poor, financial deregulation, and expansionary monetary policy. Specialists in ...banking, however, tell a story with less emotional resonance but a better correspondence to the evidence: the crisis was sparked by the international regulatory accords on bank capital levels, the Basel Accords.
In one of the first studies critically to examine the Basel Accords,Engineering the Financial Crisisreveals the crucial role that bank capital requirements and other government regulations played in the recent financial crisis. Jeffrey Friedman and Wladimir Kraus argue that by encouraging banks to invest in highly rated mortgage-backed bonds, the Basel Accords created an overconcentration of risk in the banking industry. In addition, accounting regulations required banks to reduce lending if the temporary market value of these bonds declined, as they did in 2007 and 2008 during the panic over subprime mortgage defaults.
The book begins by assessing leading theories about the crisis-deregulation, bank compensation practices, excessive leverage, "too big to fail," and Fannie Mae and Freddie Mac-and, through careful evidentiary scrutiny, debunks much of the conventional wisdom about what went wrong. It then discusses the Basel Accords and how they contributed to systemic risk. Finally, it presents an analysis of social-science expertise and the fallibility of economists and regulators. Engagingly written, theoretically inventive, yet empirically grounded,Engineering the Financial Crisisis a timely examination of the unintended-and sometimes disastrous-effects of regulation on complex economies.
Despite the devastating worldwide human and economic tolls of the COVID-19 crisis, it has created some positive economic and financial surprises and opportunities for research. This paper highlights ...two such favorable surprises – the shortest U.S. recession on record and the avoidance of any banking crisis – and a number of research opportunities. The paper ties the “economic surprise” of the short recession to the speed and size of U.S. stimulus programs during COVID-19 – faster and larger than for the Global Financial Crisis (GFC). We connect the “financial surprise” of the resilient banking sector to prudential policies put in place during and after the GFC that fortified U.S. banks prior to COVID-19. These twin “surprises” are also mutually reinforcing – if either the economy or banking system had failed, so would the other. The paper also reviews extant COVID-19 banking research and suggest paths for future research. It recommends that particular attention be paid to research outside of the U.S. – where fewer favorable “surprises” may be present – as the best way to advance knowledge in this area.
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GEOZS, IJS, IMTLJ, KILJ, KISLJ, NLZOH, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UILJ, UL, UM, UPCLJ, UPUK, ZAGLJ, ZRSKP
This book is the first to address the multi-faceted influence of the global financial crisis on the national constitutions of the countries most affected. By tracing the impact of the crisis on ...formal and informal constitutional change, sovereignty issues, fundamental rights protection, regulatory reforms, jurisprudence, the augmentation of executive power, and changes in the party system it addresses all areas of the current constitutional law dialogue and aims to become a reference book with regard to the interaction between financial crises and constitutions.
The book includes contributions from prominent experts on Greece, Hungary, Iceland, Ireland, Italy, Latvia, Portugal, Spain, the UK, and the USA providing a critical analysis of the effects of the financial crisis on the constitution. The volume's extensive comparative chapter pins down distinct constitutional reactions towards the financial crisis, building an explanatory theory that accounts for the different ways constitutions responded to the crisis. How and why constitutions formed their reactions in the face of the financial crisis unravels throughout the book.
Though overall bank performance from July 2007 to December 2008 was the worst since the Great Depression, there is significant variation in the cross-section of stock returns of large banks across ...the world during that period. We use this variation to evaluate the importance of factors that have been put forth as having contributed to the poor performance of banks during the credit crisis. The evidence is supportive of theories that emphasize the fragility of banks financed with short-term capital market funding. The better-performing banks had less leverage and lower returns immediately before the crisis. Differences in banking regulations across countries are generally uncorrelated with the performance of banks during the crisis, except that large banks from countries with more restrictions on bank activities performed better and decreased loans less. Our evidence poses a substantial challenge to those who argue that poor bank governance was a major cause of the crisis because we find that banks with more shareholder-friendly boards performed significantly worse during the crisis than other banks, were not less risky before the crisis, and reduced loans more during the crisis.
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GEOZS, IJS, IMTLJ, KILJ, KISLJ, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UL, UM, UPCLJ, UPUK
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