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Full-Text Articles in Social and Behavioral Sciences
The Federal Reserve’S Financial Crisis Response E: The Term Asset-Backed Securities Loan Facility, Rosalind Z. Wiggins, Andrew Metrick
The Federal Reserve’S Financial Crisis Response E: The Term Asset-Backed Securities Loan Facility, Rosalind Z. Wiggins, Andrew Metrick
Journal of Financial Crises
Securitization is a process that allows banks and other lenders to package loans and sell them as bonds called asset-backed securities (ABS), removing them from their balance sheets and immediately generating cash for new loans. ABS are an important component of the financing cycle for many types of loans to households and small businesses, including mortgages. In the fall of 2008, financial markets began experiencing disturbances as the effects of the U.S. subprime market meltdown spread. The ABS market froze decreasing the volume of new loans to households and small businesses. The Federal Reserve became very concerned about the potential …
The Federal Reserve’S Financial Crisis Response D: Commercial Paper Market Facilities, Rosalind Z. Wiggins, Andrew Metrick
The Federal Reserve’S Financial Crisis Response D: Commercial Paper Market Facilities, Rosalind Z. Wiggins, Andrew Metrick
Journal of Financial Crises
During the summer of 2007, the U.S. residential mortgage market began to decline sharply negatively impacting the asset-backed commercial paper (ABCP) market, which often relied on mortgages as underlying support. Money Market Mutual Funds (MMMFs), significant investors in commercial paper (CP), quickly retreated from the market, causing a substantial decline in outstanding ABCP. In September 2008, pressures on the markets severely escalated again, when the Reserve Primary Fund MMMF “broke the buck” and prompted run-like redemption requests by many MMMF investors. These disruptions resulted in higher rates and shorter maturities, practically freezing the market for term CP. Concerned about the …
The Federal Reserve’S Financial Crisis Response C: Providing U.S. Dollars To Foreign Central Banks, Rosalind Z. Wiggins, Andrew Metrick
The Federal Reserve’S Financial Crisis Response C: Providing U.S. Dollars To Foreign Central Banks, Rosalind Z. Wiggins, Andrew Metrick
Journal of Financial Crises
The financial crisis that began in late 2007 with the decline in the United States (U.S.) subprime mortgage markets quickly spread to other markets and eventually disrupted the interbank funding markets in the U.S. as well as overseas. To address the strain in the U.S. dollar (USD) funding markets, the Federal Reserve worked with foreign central banks around the world to provide USD liquidity to affected overseas markets by entering into currency swap agreements. Following the bankruptcy of Lehman Brothers in September 2008, and the resulting further destabilization of the world’s financial systems, the size and utilization of these swaps …
The Federal Reserve’S Financial Crisis Response A: Lending & Credit Programs For Depository Institutions, Rosalind Z. Wiggins, Andrew Metrick
The Federal Reserve’S Financial Crisis Response A: Lending & Credit Programs For Depository Institutions, Rosalind Z. Wiggins, Andrew Metrick
Journal of Financial Crises
Beginning in summer 2007, the Federal Reserve (the Fed) was called upon to address a severe disruption in the interbank lending markets sparked by a downturn in the subprime mortgage market. As these developments began to impact the ability of banks to raise adequate funding, the Fed encouraged them to utilize the Discount Window (DW), its standing facility for lending to depository institutions, and repeatedly decreased the lending rate to make the facility more accessible. Despite the Fed’s efforts, for a number of reasons, including historical perceptions of stigma, banks were reluctant to utilize the DW. In December 2007, the …
Lessons Learned: David Wessel, Ben Henken, Rosalind Z. Wiggins
Lessons Learned: David Wessel, Ben Henken, Rosalind Z. Wiggins
Journal of Financial Crises
Wessel, an award-winning journalist for The Wall Street Journal, talks about some of the issues faced by the media in covering the crisis, discusses the many challenges policymakers faced when trying to communicate the government’s crisis-fighting strategy, and shares suggestions for improvement.
Basel Iii F: Callable Commercial Paper, Christian M. Mcnamara, Rosalind Bennett, Andrew Metrick
Basel Iii F: Callable Commercial Paper, Christian M. Mcnamara, Rosalind Bennett, Andrew Metrick
Journal of Financial Crises
One of the Basel Committee on Banking Supervision’s responses to the global financial crisis of 2007-09 was to introduce the Liquidity Coverage Ratio (LCR), a short-term measure that evaluates whether a bank has enough liquidity to meet expected cash outflows during a 30-day stress scenario. One area in which this incentive has already resulted in changed practices is in the market for commercial paper. Banks often provide backup liquidity facilities to the issuers of commercial paper that the issuers can draw upon to repay a maturing issue of commercial paper if they are unable to sell a new issue to …
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 …