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Full-Text Articles in Law
Inside Safe Assets, Anna Gelpern, Erik F. Gerding
Inside Safe Assets, Anna Gelpern, Erik F. Gerding
Georgetown Law Faculty Publications and Other Works
“Safe assets” is a catch-all term for financial contracts that market participants treat as if they were risk-free. These may include government debt, AAA corporate debt, bank debt, and asset-backed securities, among others. The International Monetary Fund estimated potential safe assets at more than $114 trillion worldwide in 2011, over seven times the U.S. economic output that year.
To treat any contract as if it were risk-free seems delusional after apparently super-safe public and private debt markets collapsed overnight. Nonetheless, financial crises have only raised the policy and academic profile of safe assets, invoked to explain global imbalances, shadow banking, …
Financial Crisis Containment, Anna Gelpern
Financial Crisis Containment, Anna Gelpern
Georgetown Law Faculty Publications and Other Works
This Article maps financial crisis containment - extraordinary measures to stop the spread of financial distress - as a category of legal and policy choice. I make three claims.
First, containment is distinct from financial regulation, crisis prevention and resolution. Containment is brief; it targets the immediate term. It involves claims of emergency, rule-breaking, time inconsistency and moral hazard. In contrast, regulation, prevention and resolution seek to establish sound incentives for the long term. Second, containment decisions deviate from non-crisis norms in predictable ways, and are consistent across diverse countries and crises. Containment invariably entails three kinds of choices: choices …