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Full-Text Articles in Finance
Lessons Learned: Deborah Perelmuter, Mercedes Cardona
Lessons Learned: Deborah Perelmuter, Mercedes Cardona
Journal of Financial Crises
Deborah Perelmuter has spent more than three decades with the Federal Reserve System. In 2008, as senior vice president at the Federal Reserve Bank of New York (FRBNY) and co-head of Capital Markets Analysis and Trading (CMAT) within the Markets Group, she was tasked with setting up the operational details of the Term Securities Lending Facility (TSLF). The TSLF auctioned Treasury securities to primary dealers in exchange for less liquid collateral to provide liquidity to those firms during the Global Financial Crisis of 2007–2009. Perelmuter became senior financial stability adviser within the office of the director in the FRBNY’s Research …
Lessons Learned: Patrick Honohan, Maryann Haggerty
Lessons Learned: Patrick Honohan, Maryann Haggerty
Journal of Financial Crises
Patrick Honohan, an economist, was governor of the Central Bank of Ireland and a member of the Governing Council of the European Central Bank (ECB) from September 2009 until November 2015. Early in his tenure, he led a team that investigated the causes of the Irish banking crisis that broke out in 2008 during the Global Financial Crisis. Resolving the problems of bank failure and over-indebtedness that emerged in that crisis dominated his term of office. In late 2010, Ireland had to request financial assistance from the “troika” of the International Monetary Fund (IMF), the European Commission, and the European …
Lessons Learned: Andrew Gray, Mercedes Cardona
Lessons Learned: Andrew Gray, Mercedes Cardona
Journal of Financial Crises
Andrew Gray joined the FDIC in 2007, after having been majority director of communications for the US Senate Committee on Banking, Housing, and Urban Affairs and press secretary for US Senator Richard C. Shelby (R–AL). Gray’s initial project was a campaign to mark the 75th anniversary of the creation of the Federal Deposit Insurance Corporation (FDIC); his role evolved into running crisis communications as the FDIC stepped in during several bank failures triggered by the Global Financial Crisis (GFC) and conducted 489 bank resolutions during 2008–2013. After the crisis, the FDIC also assumed new responsibilities over the winding down of …
Peru: Reserve Requirements, Gfc, Sean Fulmer, Bailey Decker
Peru: Reserve Requirements, Gfc, Sean Fulmer, Bailey Decker
Journal of Financial Crises
Peru experienced the Global Financial Crisis of 2007–2009 (GFC) in two distinct phases. First, starting in the summer of 2007, record capital inflows to the Peru banking sector contributed to an overheating economy. The Banco Central de Reserva del Perú (BCRP) responded in September 2007 by removing reserve requirements on long-term external credit to promote long-term, rather than short-term, capital inflows. In February 2008, for similar reasons, it began to raise the ordinary minimum reserve requirement on bank liabilities and implemented new marginal reserve requirements on increases in those liabilities. Second, when the collapse of the US investment bank Lehman …
Jamaica: Reserve Requirements, Gfc, Corey N. Runkel
Jamaica: Reserve Requirements, Gfc, Corey N. Runkel
Journal of Financial Crises
In October 2008, the Global Financial Crisis (GFC) and liquidity shortages rocked American and European markets, causing investors to exit liquid Jamaican-dollar assets. The Bank of Jamaica (BOJ) feared a “disorderly depreciation” in the Jamaican-dollar (JMD) exchange rate to the US dollar (BOJ 2009, 44). In response, the BOJ raised required reserve ratios for cash and other liquid assets, the first increases since 2002. The BOJ raised reserve ratios three times—in December 2008, January 2009, and February 2009—because the central bank could not change its requirements by more than 200 basis points per month. The BOJ raised the requirement for …
Ireland: Credit Institution (Financial Support) Scheme, 2008, Stella Schaefer-Brown
Ireland: Credit Institution (Financial Support) Scheme, 2008, Stella Schaefer-Brown
Journal of Financial Crises
The Global Financial Crisis exposed fragilities in the Irish banking system and led to widespread runs on Irish banks. Irish authorities attempted to address the runs on September 22, 2008, by increasing the country’s deposit guarantee limit from EUR 20,000 to EUR 100,000 (USD 28,800 to USD 140,000) and raising the coverage of deposits from 90% to 100%. When the runs continued, the Irish minister for finance announced a blanket guarantee of bank liabilities on September 30 without consulting European Union authorities. The announcement specified the blanket guarantee would be effective immediately and remain in effect for two years. The …
Denmark: General Guarantee Scheme, 2008, Benjamin Hoffner
Denmark: General Guarantee Scheme, 2008, Benjamin Hoffner
Journal of Financial Crises
As foreign credit in Denmark dried up during the summer of 2008, Danish banks became increasingly reliant on short-term borrowing. The government took over the failing Roskilde Bank, the country’s eighth-largest bank, in late August. On October 5, 2008, the government announced a voluntary General Guarantee Scheme to fully insure deposits and other senior liabilities of participating banks. Banks could participate in the scheme by becoming members of the financial sector’s banking consortium, Det Private Beredskab, or in English, the Private Contingency Association (PCA), before October 13, 2008. The General Guarantee Scheme fully insured all depositors and senior unsecured creditors …
Lessons Learned: Steven Rattner, Mary Anne Chute Lynch
Lessons Learned: Steven Rattner, Mary Anne Chute Lynch
Journal of Financial Crises
Steven Rattner, an investment banker and private equity professional, joined the Obama administration as counselor to the Secretary of the Treasury and head of the Obama administration’s Task Force on the Auto Industry, which was charged with providing aid to Chrysler and General Motors, and later to other entities, to avoid their disorderly failure and the loss of a million or more jobs. The Auto Task Force worked intensely throughout 2009 to swiftly negotiate with the corporate leadership, unions, investors, and other stakeholders of the two manufacturers to design an orderly restructuring that would put the companies on a path …
Lessons Learned: Harry Wilson, Mary Anne Chute Lynch
Lessons Learned: Harry Wilson, Mary Anne Chute Lynch
Journal of Financial Crises
Harry Wilson was one of four senior advisers to the US Department of the Treasury during the Obama administration and served on the President’s Task Force on the Auto Industry, which was established in 2009 and charged with providing aid to General Motors and Chrysler, and later to other entities, to avoid their disorderly failure and the loss of a million or more jobs. The Auto Task Force worked intensively throughout 2009 to swiftly negotiate with the corporate leadership, unions, investors, and other stakeholders of the two manufacturers to design an orderly restructuring that would put the companies on a …
Lessons Learned: Sadiq Malik, Mary Anne Chute Lynch
Lessons Learned: Sadiq Malik, Mary Anne Chute Lynch
Journal of Financial Crises
Sadiq Malik was a member of the Obama administration’s Task Force on the Auto Industry, which was established in 2009 and charged with providing aid to Chrysler and General Motors, and later to other entities, to avoid their disorderly failure and the loss of a million or more jobs. The Auto Task Force worked intensively throughout 2009 to swiftly negotiate with the corporate leadership, unions, investors, and other stakeholders of the two manufacturers, to design an orderly restructuring that would put the companies on a path to stability. Malik, working for the Auto Task Force, helped take General Motors through …
Lessons Learned: Matthew Feldman, Mary Anne Chute Lynch
Lessons Learned: Matthew Feldman, Mary Anne Chute Lynch
Journal of Financial Crises
Matthew Feldman was the chief legal advisor to the Department of the Treasury on the Obama administration’s Task Force on the Auto Industry, which was established in 2009 and charged with providing aid to Chrysler and General Motors (GM), and later other entities, to avoid their disorderly failure and the loss of a million or more jobs. The Auto Task Force worked intensively throughout 2009 to swiftly negotiate with corporate leadership, unions, investors, and other stakeholders of the two manufacturers to design an orderly restructuring that would put the companies on a path to stability. Treasury Secretary Timothy Geithner recognized …
Lessons Learned: Mara Mcneill, Mary Anne Chute Lynch
Lessons Learned: Mara Mcneill, Mary Anne Chute Lynch
Journal of Financial Crises
Mara McNeill was senior counsel to the US Department of the Treasury on the Obama administration’s Automotive Investment Financing Program (AIFP) during the Global Financial Crisis (GFC) of 2007–09. As senior counsel, McNeill was responsible for the department’s $80 billon financing of General Motors, Chrysler, Ally Financial, and Chrysler Financial. She worked with the Auto Team Task Force, the Troubled Assets Relief Program (TARP) legal team, and the Department of Treasury. The bipartisan AIFP team was charged with overseeing the government’s efforts to assist the companies toward a “new lease on life,” while exercising strong financial principles to protect the …
Lessons Learned: Ron Bloom, Mary Anne Chute Lynch
Lessons Learned: Ron Bloom, Mary Anne Chute Lynch
Journal of Financial Crises
Ron Bloom served as senior adviser to Secretary of the Treasury Timothy Geithner on President Barack Obama’s Task Force on the Automotive Industry and as assistant to the president for manufacturing policy (2009–2011). As senior adviser on the Auto Task Force team, Bloom helped lead the restructuring of General Motors and Chrysler LLC. Subsequently, he advised the Obama administration with policy development and strategic planning to revitalize the manufacturing sector. Bloom brought to Treasury his unique experience working with organized labor (including the United Steelworkers Union, United Auto Workers, the Teamsters, the Air Line Pilots Association), and in the investment …
Us Community Development Capital Initiative (Cdci), Adam Kulam
Us Community Development Capital Initiative (Cdci), Adam Kulam
Journal of Financial Crises
The United States Department of the Treasury responded to the Global Financial Crisis with an economy-wide stimulus package called the Troubled Assets Relief Program (TARP). Within the portion of TARP’s budget dedicated to bank investments, about $570.1 million was disbursed to community development financial institutions (CDFIs)—specifically, banks and credit unions (depositories)—in a program called the Community Development Capital Initiative (CDCI). Through the CDCI, Treasury provided capital to CDFI depositories, encouraged them to lend to small businesses, and promoted other community-oriented goals. The CDFI depositories issued either preferred shares or unsecured subordinated debentures to Treasury at low (2%) interest rates for …
Basel Iii B: Basel Iii Overview, Christian M. Mcnamara, Michael Wedow, Andrew Metrick
Basel Iii B: Basel Iii Overview, Christian M. Mcnamara, Michael Wedow, Andrew Metrick
Journal of Financial Crises
In the wake of the financial crisis of 2007-09, the Basel Committee on Banking Supervision (BCBS) faced the critical task of diagnosing what went wrong and then updating regulatory standards aimed at preventing it from occurring again. In seeking to strengthen the microprudential regulation associated with the earlier Basel Accords while also adding a macroprudential overlay, Basel III consists of proposals in three main areas intended to address 1) capital reform, 2) liquidity standards, and 3) systemic risk and interconnectedness. This case considers the causes of the 2007-09 financial crisis and what they suggest about weaknesses in the Basel regime …
European Banking Union D: Cross-Border Resolution—Dexia Group, Rosalind Z. Wiggins, Natalia Tente, Andrew Metrick
European Banking Union D: Cross-Border Resolution—Dexia Group, Rosalind Z. Wiggins, Natalia Tente, Andrew Metrick
Journal of Financial Crises
In September 2008, Dexia Group, SA, the world’s largest provider of public finance, experienced a sudden liquidity crisis. In response, the governments of Belgium, France, and Luxembourg provided the company a capital infusion and credit support. In February 2010, the company adopted a European Union (EU)-approved restructuring plan that required it to scale back its businesses and cease proprietary trading. In June 2011, Dexia withdrew from the government-sponsored credit support program before its expiration date, and in July, the company announced that it had passed an EU stress test. However, just three months later, Dexia wrote down its substantial position …
Ireland And Iceland In Crisis C: Iceland’S Landsbanki Icesave, Arwin G. Zeissler, Thomas Piontek, Andrew Metrick
Ireland And Iceland In Crisis C: Iceland’S Landsbanki Icesave, Arwin G. Zeissler, Thomas Piontek, Andrew Metrick
Journal of Financial Crises
At year-end 2005, almost all of the total assets of Iceland’s banking system were concentrated in just three banks (Glitnir, Kaupthing, and Landsbanki). These banks were criticized by certain financial analysts in early 2006 for being overly dependent on wholesale funding, much of it short-term, that could easily disappear if creditors’ confidence in these banks faltered for any reason. Landsbanki, followed later by Kaupthing and then Glitnir, responded to this criticism and replaced part of their wholesale funding by using online accounts to gather deposits from individuals across Europe. In Landsbanki’s case, these new deposits were marketed under the name …
Ireland And Iceland In Crisis A: Increasing Risk In Ireland, Arwin G. Zeissler, Karen Braun-Munzinger, Andrew Metrick
Ireland And Iceland In Crisis A: Increasing Risk In Ireland, Arwin G. Zeissler, Karen Braun-Munzinger, Andrew Metrick
Journal of Financial Crises
Ireland went from being the poorest member of the European Economic Community in 1973 to enjoying the second highest per-capita income among European countries by 2007. Healthy growth in the 1990s eventually gave way to a concentrated boom in property-related lending in the 2000s. The growth in the aggregate loan balances of Ireland’s six major banks greatly exceeded the growth in gross domestic product (GDP); as a result, bank loan balances grew from 1.1 times GDP in 2000 to over 2.0 times GDP by 2007. Given the small size of the domestic retail depositor base, the Irish banks increasingly funded …
The Temporary Liquidity Guarantee Program: A Systemwide Systemic Risk Exception, Lee Davison
The Temporary Liquidity Guarantee Program: A Systemwide Systemic Risk Exception, Lee Davison
Journal of Financial Crises
In the fall of 2008, short-term credit markets were all but frozen, creating liquidity issues for banks and bank holding companies that could not rollover their debt at reasonable rates. Fearing that the situation would worsen if something was not done, the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve Board invoked, and the Secretary of the Treasury approved, the use of the “systemic risk exception” (SRE) under the Federal Deposit Insurance Corporation Improvement Act of 1991, to provide unprecedented broad-based relief to struggling banks. The SRE permitted the FDIC to depart from its “least-cost” requirement when addressing failing …