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Full-Text Articles in Law
Drastic Times Call For Drastic Risk Measures: Why Value-At-Risk Is (Still) A Flawed Preventative Of Financial Crises And What Regulators Can Do About It, Andrew L. Mcelroy
Drastic Times Call For Drastic Risk Measures: Why Value-At-Risk Is (Still) A Flawed Preventative Of Financial Crises And What Regulators Can Do About It, Andrew L. Mcelroy
The Journal of Business, Entrepreneurship & the Law
Bank regulators recently proposed the most fundamental reforms to U.S. banking law in decades, yet the value-at-risk statistic--replete with known deficiencies--remains the basis of the capital adequacy requirement. Consequently, there exists an unresolved tension in the law: the purpose of the banking rules is to require riskier financial institutions to hold additional capital, yet the value-at-risk statistic used to make this assessment induces a perverse incentive to hold the riskiest securities. Overlaid on this framework is the wide latitude afforded to banks in designing their value-at-risk models. This Article explores foreseeable issues with the regulatory reliance on value-at-risk. Moreover, it …
Was The Congressional Grant Of 'Bailout' Authority To Treasury Secretary Henry Paulson Really So "Unprecedented?": A Historical Analysis And Comparison Of Treasury Secretary Authority During Financial Crisis, Zachary Cormier
The Journal of Business, Entrepreneurship & the Law
No abstract provided.
The Inherent Instability Of The Financial System, Kim De Glossop
The Inherent Instability Of The Financial System, Kim De Glossop
The Journal of Business, Entrepreneurship & the Law
The article explores one of the causes of the financial crisis of 2008 and of financial crises generally. The argument of the paper is that rather than tend toward equilibrium, financial and asset markets have a tendency to become unstable after prolonged periods of stability. The main driver of this process is the expansion of credit. Debt feeds its way into higher asset prices which in turn justify the accumulation of more debt to purchase further assets, and so on. The basis for the idea is Hyman Minsky's Financial Instability Hypothesis, itself a reinterpretation of The General Theory of Employment, …