Economic History Commons^™

Lessons Learned: Steven H. Kasoff, Matthew A. Lieber

Journal of Financial Crises

Steve Kasoff was employed at Elliott Management Corporation from 2003 until 2020. His responsibilities centered on developing the structured products and real estate groups at Elliott. He was made senior portfolio manager, a member of the firm’s management committee, and equity partner. Kasoff has extensive experience in the origination, trading, and management of structured products such as collateralized debt obligations (CDOs) and mortgage-backed securities, including earlier posts at Deutsche Bank, Merrill Lynch, and Lehman Brothers. He earned his BA in economics from Yale College and his MBA in finance from the Wharton School of the University of Pennsylvania. In 2016, …

Lessons Learned: James Finkel, Steven H. Kasoff, Matthew A. Lieber

Journal of Financial Crises

A Wall Street veteran specializing in structured credit transactions, Jim Finkel was co-founder and director of the structured credit asset management firm Dynamic Credit Partners (DCP) from 2003 to 2009. Finkel started his career as a securities lawyer for the international law firm Cadwalader, Wickersham & Taft LLP, before moving over to the banking side in 1992. He specialized in mortgage-backed securities and collateralized loan obligations (CLOs) for several firms, including Bear Stearns and Deutsche Bank, where he headed the London-based CLO group. In 2003, Finkel returned to New York to launch and run DCP. In 2010, he joined financial …

Anatomy Of A Trade: The Making Of A Subprime Cdo, Steven H. Kasoff

Journal of Financial Crises

This article presents a short story, a sketch in eight parts of a single fictitious subprime collateralized debt obligation (CDO) transaction. The story is informed by expert interviews, documentary research, and the author’s firsthand experience.

A Special Project: Inside The Cdo Machine, Rosalind Z. Wiggins, Andrew Metrick

Journal of Financial Crises

In this issue of the Journal of Financial Crisis, we feature Inside the CDO Machine—a special undertaking recently completed under the auspices of the Yale Program on Financial Stability Lessons Learned Oral History Project by Steven H. Kasoff, a Yale School of Management Fellow and former equity partner and head of real estate and structured products investments at the Elliott Management Corp., a global hedge fund. For the project, Kasoff undertook a series of interviews with industry professionals to focus on one of the critical derivatives products of the Global Financial Crisis (GFC), collateralized debt obligations (CDOs), and how they …

Wall Street’S Subprime Debacle: Firsthand Accounts From Inside The Cdo Machine, Matthew A. Lieber, Steven H. Kasoff

Journal of Financial Crises

The observations, perceptions, and actions of participants in the subprime markets remain poorly documented and incompletely understood. Seeking to deepen our understanding, this study has produced seven interview summaries and one article telling the story of a hypothetical CDO deal. This article is organized in four parts. First, it presents our research questions and methods in relation to the existing knowledge on the topic. Second, it describes what we think are the study’s main contributions. Third, it previews the Lessons Learned summaries and interviews from each of the participants. And last, it identifies what we believe are some of the …

The Rescue Of The Us Auto Industry, Module Z:Overview, Rosalind Z. Wiggins, Greg Feldberg, Alexander Nye, Andrew Metrick

Journal of Financial Crises

In the fall of 2008, credit markets tightened amid a broader economic downturn that severely impacted the US auto industry, especially the three largest domestic manufacturers, General Motors (GM), Ford Motors, and Chrysler. The companies requested assistance from the government in a bid to stay afloat, but Congress declined to authorize funding. The Bush administration, however, provided bridge loans to GM and Chrysler under the Auto Industry Finance Program (AIFP), funded through the Troubled Assets Relief Program (TARP), to sustain them until the Obama administration was in place. Within months, the Obama administration decided that a speedy bankruptcy would be …

The Rescue Of The Us Auto Industry, Module G: The Auto Warranty Commitment Program, Benjamin Henken

Journal of Financial Crises

On March 30, 2009, President Barack Obama announced a plan for government-funded protection of warranties on new vehicles sold by General Motors (GM) and Chrysler while the companies underwent restructuring. The initiative, which would become known as the Auto Warranty Commitment Program (AWCP), was intended to bolster consumer confidence by alleviating a major risk—the loss of warranty benefits—to consumers associated with the companies’ potential bankruptcies. Under the AWCP, GM and Chrysler established independent special purpose vehicles (SPVs) to which they transferred a combination of their own money along with funding they received from Treasury in the form of a loan. …

The Rescue Of The Us Auto Industry, Module F: Auto Supplier Support Program, Riki Matsumoto

Journal of Financial Crises

The Global Financial Crisis that began in 2007 intensified the decade-long malaise of two of the largest auto manufacturers in the US, General Motors and Chrysler. Their possible collapse was deemed to pose a systemic risk by the United States government. In response, the Department of the Treasury made efforts to provide support to the automotive industry through the Automotive Industry Financing Program (AIFP). As US auto parts suppliers experienced deteriorated automotive markets, disrupted manufacturer operations, and stressed credit markets, the Treasury announced the Auto Supplier Support Program (ASSP) on March 19, 2009, as an auxiliary program to the overall …

The Rescue Of The Us Auto Industry, Module E: Emergency Assistance For Chrysler Financial, Alexander Nye

Journal of Financial Crises

In the fall of 2008, due to the confluence of the Global Financial Crisis and years of structural decline in the auto industry, Chrysler was nearing bankruptcy. Chrysler’s related finance company, Chrysler Financial, was also in dire straits. On December 19, 2008, President Bush announced the Automotive Industry Financing Program and that the US Treasury would extend Chrysler a $4 billion Bridge Loan to give the company time to prepare a viable restructuring plan. Two weeks later, the Treasury arranged $1.5 billion in low-interest financing for Chrysler Financial to fund the securitization of new consumer car loans and the facility …

The Rescue Of The Us Auto Industry, Module C: Restructuring Chrysler Through Bankruptcy, Alexander Nye

Journal of Financial Crises

In late 2008, due to the confluence of the financial crisis and years of structural decline in the auto industry, Chrysler was nearing bankruptcy. The US Treasury provided Chrysler’s owner, Chrysler Holding, with a $4 billion bridge loan and Chrysler’s related finance company, Chrysler Financial, with a $1.5 billion financing program under the Troubled Assets Relief Program (TARP). The government-led restructuring through bankruptcy involved the commitment of roughly $5 billion in debtor-in-possession (DIP) loans from the US Treasury and the Canadian government, under which the US Treasury ultimately lent $1.89 billion, using TARP funds, and Canada lent about $1 billion, …

The Rescue Of The Us Auto Industry, Module D: Emergency Assistance To Ally Financial (Formerly Gmac), Riki Matsumoto, Kaleb B. Nygaard

Journal of Financial Crises

In 2008, GMAC was a $200 billion company providing financing to General Motors customers. As the Global Financial Crisis entered a critical stage in early 2008, GMAC’s funding strategy and liquidity position were adversely affected by the significant disruption in credit markets and the broader economic downturn. This reduced access to financing, which impacted GMAC’s ability to provide automotive wholesale inventory and retail financing to General Motors and Chrysler. In late 2008 and early 2009 GM and Chrysler underwent a complex restructuring process. To restore liquidity to GMAC’s auto finance business, the Federal Reserve agreed to expedite GMAC’s conversion to …

The Rescue Of The Us Auto Industry, Module B: Restructuring General Motors Through Bankruptcy, Kaleb B. Nygaard

Journal of Financial Crises

As the Global Financial Crisis worsened in 2008, credit markets tightened and a broader economic downturn developed, hitting the auto industry particularly hard. The crisis intensified a decade-long decline of the largest US auto manufacturers. Because of its size and importance to the economy, the US government decided to provide assistance to General Motors (GM) to sustain it while it developed plans for its long-term viability. Congress declined to authorize funding for the auto manufacturers, but in December 2008, Treasury provided a bridge loan to GM under the Troubled Assets Relief Program (TARP) to sustain the company until the Obama …

The Rescue Of The Us Auto Industry, Module A: Automotive Bridge Loans, Alexander Nye

Journal of Financial Crises

In 2008, in the midst of the Global Financial Crisis, America’s Big Three automakers neared their breaking point. Two of them, General Motors (GM) and Chrysler, asked Congress for funding to prevent uncontrolled bankruptcies. Policymakers realized these uncontrolled bankruptcies would damage the manufacturing sector. Congress considered but failed to pass a framework conditioning short-term financing on the companies’ producing acceptable restructuring plans. With the companies warning that they could not survive the coming presidential transition, on December 19, 2008, President George W. Bush announced the Automotive Industry Financing Program (AIFP) under the authority of the Emergency Economic Stability Act (EESA) …

Broad-Based Capital Injection Programs, June Rhee, Junko Oguri, Greg Feldberg, Andrew Metrick

Journal of Financial Crises

This paper surveys 36 broad-based capital injection (BBCI) programs and attempts to identify some best (and worst) practices. We argue that it is crucial to distinguish between programs implemented during acute (“panic”) and chronic (“debt overhang”) phases of a crisis, where the goals of program design should be different. In an acute phase, programs should be designed to influence the behavior of bank counterparties, while in chronic phases, the focus should be on bank behavior itself. With this framing, we identify seven themes to guide program design, and provide many illustrative examples for the policymaker’s tool kit.

A Case Study: Socialism In Venezuela, Victoria Matlock

Helm's School of Government Conference - 2021-2024

No abstract provided.

Economic Propaganda In The United States, Brooklyn Montgomery

CMC Senior Theses

This thesis aims to identify and analyze three different forms of economic propaganda: cultural, structural, and political. I first examine ‘Do What You Love’ culture and its impact on the labor force. Chapter Two explores the propagation of neoliberal economics as an objective study, and the final chapter analyzes the use of Black capitalism as a political mechanism to quell Black radical sentiment. In detailing these phenomenons, I investigate the implementation, normalization, and effects, as well as the material repercussions of these ideas and structures.

Lessons Learned: Lewis "Lee" Sachs, Yasemin Esmen

Journal of Financial Crises

Lewis “Lee” Sachs was counselor to Treasury Secretary Timothy F. Geithner and head of the Obama administration’s Financial Crisis Response Team in the US Department of the Treasury. Mr. Sachs led the development and coordination of the Obama administration’s Financial Stability Plan to stabilize the financial system during the Global Financial Crisis of 2007–09 (GFC). He was tasked with continued coordination with the outgoing Bush administration, as well as putting together a team to develop further restructuring plans and oversee their execution. This “Lessons Learned” is based on an interview with Mr. Sachs.

Lessons Learned: William Nelson, Sandra Ward

Journal of Financial Crises

William Nelson was deputy director, Division of Monetary Affairs, at the Federal Reserve Board during the Global Financial Crisis of 2007–09 (GFC). As the nation’s central bank, chief financial regulator, and lender of last resort, the Federal Reserve Board took the lead in setting monetary policy and stabilizing the financial system during the crisis.

Nelson’s responsibilities at the Fed during the crisis included analysis of monetary policy and discount window policy as well as financial institution supervision, and he regularly briefed the board and the Federal Open Market Committee. He developed special expertise in designing liquidity facilities and was a …

Lessons Learned: Jenni Lecompte, Mercedes Cardona

Journal of Financial Crises

Jenni LeCompte was deputy assistant secretary in charge of public affairs operations at the Treasury Department during the Global Financial Crisis and later became assistant secretary, public affairs. She coordinated communications, served as a spokesperson, and advised Secretary Timothy Geithner during the crisis. This “Lessons Learned” is based on an interview with Ms. LeCompte.

Lessons Learned: Jason Furman, Mercedes Cardona

Journal of Financial Crises

Jason Furman was a top economic adviser to the successful presidential campaign of Barack Obama in 2008. He played a key role in most of President Obama’s major economic policies during and in the aftermath of the Global Financial Crisis of 2007–09. Furman, who had served at both the Council of Economic Advisers and National Economic Council during the Clinton administration, served as Chairman of the Council of Economic Advisers from August 2013 to January 2017, acting as President Obama’s chief economist and a member of the cabinet. He is currently Professor of the Practice of Economic Policy at the …

Lessons Learned: Matthew Kabaker, Yasemin Esmen

Journal of Financial Crises

During the Global Financial Crisis of 2007-09, Matthew Kabaker was senior adviser to Treasury Secretary Timothy F. Geithner and Treasury deputy assistant secretary, capital markets. He helped design the Treasury’s policy response to the financial crisis; design and implement the Dodd-Frank financial reforms; and address housing finance reform, including reforms at Fannie Mae and Freddie Mac. Mr. Kabaker also served on the Treasury’s Financial Stability Policy Council and Housing Policy Council. This Lessons Learned summary is based on an interview with Mr. Kabaker.

Lessons Learned: William “Bill” Dudley, Sandra Ward

Journal of Financial Crises

William “Bill” Dudley was the executive vice president of the Federal Reserve Bank of New York’s Markets Group from 2007–09 and vice chairman of the Federal Open Market Committee from 2009 to 2018. In January 2010, Dudley was named the 10th president of the New York Fed, succeeding Timothy Geithner. This Lessons Learned summary is based on an interview with Mr. Dudley.

The Us Supervisory Capital Assessment Program (Scap) And Capital Assistance Program (Cap), Aidan Lawson

Journal of Financial Crises

Due to continued stress during the Global Financial Crisis, the US Treasury released a series of additional measures in February 2009 that included a mandatory stress test for major U.S. bank holding companies (BHCs), backed by government capital. The stress test, known as the Supervisory Capital Assessment Program (SCAP), tested the capital adequacy of the 19 U.S. BHCs that had more than $100 billion in assets. A large interagency team of regulators and other experts estimated losses and income under two hypothetical scenarios for the group of BHCs: a baseline that reflected the consensus belief about the course of the …

Us Capital Purchase Program, Aidan Lawson, Adam Kulam

Journal of Financial Crises

During the fall of 2008, the US government was faced with a financial crisis of unprecedented scope. Having already exercised the authority to put Fannie Mae and Freddie Mac into conservatorship in September, the stage was set for the US government to intervene more broadly in strained financial markets. This intervention would ultimately come in the form of the Emergency Economic Stabilization Act of 2008 (EESA), which was passed on October 3, 2008. The main provision of EESA was the Troubled Asset Relief Program, or TARP, a $700 billion program initially designed to purchase troubled assets off the balance sheets …

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 …

Us Reconstruction Finance Corporation: Preferred Stock Purchase Program, Aidan Lawson

Journal of Financial Crises

By March 1933, the early collateralized lending programs of the Reconstruction Finance Corporation (RFC) had failed to prevent the recurrence of bank runs and panic in US financial markets. These conditions forced newly elected President Franklin Delano Roosevelt to call for a nationwide bank holiday from March 6 to March 9. On the final day of the holiday, a special session of Congress passed the Emergency Banking Act (EBA), which gave the RFC the power to make investments via preferred equity of distressed institutions. Under the EBA, the RFC could subscribe to and make loans on cumulative non-assessable preferred stock …

Uk Bank Recapitalisation Scheme, Alec Buchholtz

Journal of Financial Crises

Following the collapse of Lehman Brothers and the ensuing global credit crunch in late 2008, Her Majesty’s Treasury (HMT) announced a large economic package to provide support to the UK banking sector. As part of the package, the eight largest banks committed themselves to raising their total Tier 1 capital by £25 billion through either private fundraising or government assistance. Thus, the economic package featured a new Bank Recapitalisation Scheme to invest up to £50 billion in capital into UK banking and credit institutions that could not raise their assets in the private sector. Government capital was invested into either …

Turkey Saving Deposit Insurance Fund Bank Recapitalization (2000–2001), Natalie Leonard

Journal of Financial Crises

Throughout the 1990s, Turkey’s macroeconomy featured high and fluctuating inflation and oscillating GDP growth rates. After Turkey’s April 1999 elections, Turkey adopted a new economic program in coordination with the International Monetary Fund (IMF) with three goals: fiscal adjustment, structural reform, and an exchange rate commitment. By the end of the third quarter of 2000, concerns over the pace of structural reform mounted and short-term interest rates remained high. The new Banking Regulation and Supervision Agency (BRSA) revealed significant corruption within several small banks taken over by the Saving Deposit Insurance Fund (SDIF). In November 2000, Demirbank, a private bank …

Thailand Capital Support Facilities 1998, Adam Kulam

Journal of Financial Crises

After the floatation of the baht on July 2, 1997, the Thai economy endured a financial crisis from massive currency devaluation, exchange rate losses, and non-performing loans (NPLs). In response, the Thai government employed two types of restructuring programs: (1) the alleviation of NPLs and distressed assets, (2) the correction of financial institution insolvency and capital inadequacy. To help recapitalize private institutions with public funds, the government introduced tier-1 and tier-2 capital support facilities. The tier-1 facility aimed to attract private capital, and the tier-2 facility aimed to stimulate lending and corporate debt restructuring. Capital injections took the form of …

Sweden 1991 Bank Support Authority (Bankstödsnämnden), Natalie Leonard

Journal of Financial Crises

Sweden’s economic downturn and growing unemployment in the early 1990s led to increased uncertainty about banks’ risks. Turbulence in foreign exchange markets and speculation against the Swedish krona caused significant problems in the housing paper market. The ensuing banking crisis affected six of the seven largest Swedish banks. Loan losses peaked in 1992 at nearly SEK 80 billion while the banking sector recorded an operating loss of almost SEK 50 billion. In the fall of 1992, the government guaranteed all banks’ liabilities, took over two of the largest banks, and announced it would create the Bank Support Authority to manage …