Finance Commons^™

The Spanish Guarantee Scheme For Credit Institutions (Spain Gfc), Lily Engbith

Journal of Financial Crises

Given Spanish banks’ heavy investment in the housing and construction markets in the lead-up to the global financial crisis (GFC), the collapse of the subprime mortgage market and Lehman Brothers’ bankruptcy on September 15, 2008, impelled the government to implement stabilization measures to calm, recapitalize, and restructure its domestic banking sector. The Spanish Guarantee Scheme for Credit Institutions (the Guarantee Scheme) was one of the first interventions to be enacted, announced by Spain’s Ministry of Economy and Finance on October 13, 2008, by Royal Decree-Law 7/2008 on “Urgent Economic and Financial Measures in relation to the Concerted Action Plan of …

The Dutch Credit Guarantee Scheme (Netherlands Gfc), Lily Engbith

Journal of Financial Crises

As fallout from the global financial crisis intensified in October 2008, governments around the world sought to implement stabilization measures in order to calm and protect their domestic markets. While not directly exposed to the subprime mortgage crisis, the Kingdom of the Netherlands announced the creation of the Dutch Credit Guarantee Scheme (the Guarantee Scheme) on October 13, 2008, to boost confidence in interbank lending markets and to ensure the flow of credit to Dutch households and companies. In establishing this program, the Dutch State Treasury Agency of the Ministry of Finance (DSTA) committed €200 billion to support the issuance …

The State Guarantee Of External Debt Of Korean Banks (South Korea Gfc), Lily S. Engbith

Journal of Financial Crises

Following the Lehman Brothers bankruptcy of September 15, 2008, a number of foreign governments enacted stabilization measures in order to bolster their currencies and inject much-needed liquidity into domestic markets. As part of its effort, the Korean Ministry of Strategy and Finance announced a series of government interventions that included a three-year guarantee of foreign debt issued (including extensions of maturity) by domestic banks between October 20, 2008, and June 30, 2009. This opt-in program was introduced as a preemptive step in ensuring that Korean financial institutions would retain competitive access to external funding in the wake of the global …

The Guarantee Scheme For Bank Funding In Finland (Finland Gfc), Lily Engbith

Journal of Financial Crises

As the global financial crisis raged in October 2008, its severe impact on global credit markets impelled governments to enact stabilization measures to calm and protect their domestic economies. The Republic of Finland, though not directly affected, designed preemptive interventions to mitigate disruption to its financial system. Among them was the Guarantee Scheme for Bank Funding in Finland (the Guarantee Scheme), announced on October 22, 2008, and implemented on February 12, 2009, which aimed to support banks and mortgage institutions with their short- and medium-term financing needs. Under the program, the Finnish State Treasury made up to €50 billion available …

Denmark's Loan Bills Temporary Credit Facility (Denmark Gfc), Keni Sabath

Journal of Financial Crises

The loan bills temporary credit facility was first implemented in May 2008, before the Global Financial Crisis had truly hit Denmark. It continued to be utilized as part of a broader effort to increase interbank lending after the collapse of Lehman Brothers in September 2008. The objective of the loan bills scheme was to facilitate lending among financial institutions. Each week, loan bills could be pledged as collateral for a seven-day loan from Denmark’s central bank, Danmarks Nationalbank. One banking institution could borrow from another institution by issuing a loan bill, and the institution buying the bill could raise liquidity …

The European Central Bank's Three-Year Long-Term Refinancing Operations (Ecb Gfc), Aidan Lawson

Journal of Financial Crises

The announcement of the three-year Long-Term Refinancing Operations (LTROs) by the European Central Bank (ECB) on December 8, 2011, signaled the beginning of the largest ECB market liquidity programs to date. Continued and increasing liquidity-related pressures in the form of ballooning financial market credit default swap (CDS) spreads, Euro-area volatility, and interbank lending rates prompted a much more forceful ECB response than what had been done previously. The LTROs, using a repurchase (repo) agreement auction mechanism, allowed any Eurozone financial institution to tap essentially unlimited funding at a fixed rate of just 1%. Because the three-year LTROs were so similar …

Market Liquidity Programs: Gfc And Before, June Rhee, Greg Feldberg, Ariel Smith, Andrew Metrick

Journal of Financial Crises

The virulence of the Global Financial Crisis of 2007–09 (GFC) was explained in large part by the increased reliance of the global financial system on market-based funding and the lack of preexisting tools to address a disruption in that type of system. This paper surveys market liquidity programs (MLPs), which we define as government interventions in which the key motivation is to stabilize liquidity in a specific wholesale funding market that is under stress. Most of the MLPs surveyed in this paper were launched during and after the GFC, but two pre-GFC MLPs are included. A subsequent survey on MLPs …

Lessons Learned: A Conversation With Paul A. Volcker, Andrew Metrick, Rosalind Z. Wiggins, Kaleb B. Nygaard

Journal of Financial Crises

On March 26, 2019, Andrew Metrick, the Janet Yellen Professor of Finance at the Yale School of Management and Founder and Director of the Yale Program on Financial Stabilitysat down with Paul A. Volcker to discuss his perspectives on the Federal Reserve, central banking autonomy, “too big to fail,” and how his perspectives on these topics have changed over the decades.It turned out to be one of the last interviews given by the former Chairman of the Federal Reserve System who passed away on December 8, 2019, at the age of 92.

Addressing Urban Income Inequality Through Education: A Case Study In Atlanta, Garrett Bronn

Finance Undergraduate Honors Theses

For decades, the income inequality gap between the rich and poor has continued to expand dramatically, with criticism of existing education systems often at the heart of the issue. Large urban cities are commonly at the forefront of the issue, given the plethora of teacher strikes in recent years. Events such as the 11-day Chicago teacher’s strike in October of 2019 that idled academics and college prep for 350,000 students, have highlighted many current education issues (Hauck, 2019). With underfunded and poorly equipped middle and high schools, students in poor and minority neighborhoods in cities are less prepared academically, ill …

Restructuring And Forgiveness In Financial Crises A: The Mexican Peso Crisis Of 1994-95, Christian M. Mcnamara, June Rhee, Andrew Metrick

Journal of Financial Crises

Following a year in which repeated political turmoil sapped investor confidence in Mexico, putting pressure on the peso and draining the country’s foreign exchange reserves, on December 22, 1994, the Mexican government sparked a financial crisis by unexpectedly abandoning its policy of anchoring the peso to the US dollar and instead allowing it to float freely. The resulting collapse of the peso left Mexico with $40 billion to $50 billion in external debt (much of it dollar-indexed) coming due in the near term and almost no foreign exchange reserves. Faced with the prospect that Mexico would either default on its …

Guarantees And Capital Infusions In Response To Financial Crises C: U.S. 2009 Stress Test, Chase P. Ross, June Rhee, Andrew Metrick

Journal of Financial Crises

When President Obama took office in 2009, the Treasury focused on restarting bank lending and repairing the ability of the banking system as a whole to perform the role of credit intermediation. In order to do so, the Treasury needed to raise public confidence that banks had sufficient buffers to withstand even a very adverse economic scenario, especially given heightened uncertainty surrounding the outlook of the U.S. economy and potential losses in the banking system. The Supervisory Capital Assessment Program (SCAP)—the so-called “stress tests”—sought to rigorously measure the resilience of the largest bank holding companies. Those found to have insufficient …

Guarantees And Capital Infusions In Response To Financial Crises B: U.S. Guarantees During The Global Financial Crisis, June Rhee, Andrew Metrick

Journal of Financial Crises

During 2008-09, the federal government extended multiple guarantee programs in an effort to restore the financial market and contain the panic and crisis in the market. For example, the Treasury provided a temporary guarantee program for the money market funds, the FDIC decided to stand behind certain debts and non-interest-bearing transaction accounts, and the Treasury, the FDIC, and the Federal Reserve agreed to share losses in certain assets belonging to Citigroup. This case reviews these guarantee programs implemented during the global financial crisis by the government and explores the different rationale that shaped certain design features of each program.

The Sustainability Of Child Protection Services In The Republic Of Kosovo, Shpetim Bylykbashi

Capstone Collection

Today, in Kosovo, are services provided for the children most in need sustainable? Do these services have stable and long-term funding? Did the decentralization of the Kosovo government strengthen or weaken the existing child protective environment? In an attempt to answer these questions, a review of available literature was completed, as well as direct interviews conducted with relevant stakeholders engaged in Kosovo’s child protection services at both the governmental and civil society levels. The main finding of my research is that vulnerable children in Kosovo, such as children without parental care, children with special needs, and child victims of domestic …

Lessons Learned: Ray Dalio, Andrew Metrick, Rosalind Z. Wiggins, Kaleb B. Nygaard

Journal of Financial Crises

Insights from a discussion with Ray Dalio, Founder, Chairman, and Co-Chief Investment Officer of Bridgewater Associates, one of the largest hedge funds in the world. Topics range from monetary policy to communications strategy when responding to a financial crisis.

Basel Iii G: Shadow Banking And Project Finance, Christian M. Mcnamara, Andrew Metrick

Journal of Financial Crises

The Net Stable Funding Ratio (NSFR), a liquidity standard introduced by Basel III, seeks to promote a better match between the liquidity of a bank’s assets and the manner in which the bank funds those assets. The NSFR requires banks to maintain a minimum amount of funding deemed “stable” by the Basel framework based on the liquidity of the banks’ assets and activities over a one-year timeframe. One of the areas seen as most affected by this development may be bank participation in project finance for infrastructure development. Since the global demand for infrastructure development remains robust, the shadow banking …

Basel Iii D: Swiss Finish To Basel Iii, Christian M. Mcnamara, Natalia Tente, Andrew Metrick

Journal of Financial Crises

After the Basel Committee on Banking Supervision (BCBS) introduced the Basel III framework in 2010, individual countries confronted the question of how best to implement the framework given their unique circumstances. Switzerland, with a banking industry that is both heavily concentrated and very large relative to the size of its overall economy, faced a special challenge. It ultimately adopted what is sometimes referred to as the “Swiss Finish” to Basel III—enhanced requirements applicable to Switzerland’s “too-big-to-fail” banks Credit Suisse and UBS that go beyond the base requirements established by the BCBS. Yet the prominent role played by relatively new contingent …

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 …

Jpmorgan Chase London Whale Z: Background & Overview, Arwin G. Zeissler, Rosalind Bennett, Andrew Metrick

Journal of Financial Crises

In December 2011, the Chief Executive Officer and Chief Financial Officer of JPMorgan Chase (JPM) instructed the bank’s Chief Investment Office to reduce the size of its Synthetic Credit Portfolio (SCP) during 2012, so that JPM could decrease its Risk-Weighted Assets as the bank prepared to adopt the impending Basel III bank capital regulations. However, the SCP traders were also told to minimize the trading costs incurred to reduce Risk-Weighted Assets, while still maintaining the opportunity to profit from unexpected corporate bankruptcies. In an attempt to balance these competing objectives, head SCP derivatives trader Bruno Iksil suggested in January 2012 …

Incorporating Macroprudential Financial Regulation Into Monetary Policy, Aaron Klein

Journal of Financial Crises

This paper proposes two insights into financial regulation and monetary policy. The first enhances understanding the relationship between them, building on the automobile metaphor that describes monetary policy: when to accelerate or brake for curves miles ahead. Enhancing the metaphor, financial markets are the transmission. In a financial crisis, markets cease to function, equivalent to a transmission shifting into neutral. This explains both monetary policy’s diminished effectiveness in stimulating the economy and why the financial crisis shock to real economic output greatly exceeded central bank forecasts.

The second insight is that both excess leverage and fundamental mispricing of asset values …

Environmental Governance For Whom? Examining The Political, Institutional, Fiscal, And Legal Determinants Of State Environmental Agency Budget Policy In The Us, Andrew R. Duggan

Theses and Dissertations

Budgets are a prospective tool of governance, and appropriations are a planning vehicle reflecting: bureaucracies’ values, complex interactions, collective preferences, political influences, and available resources. Research spanning 30 years finds that environmental pollution is a key determinant of environmental budgets in the US, though myriad factors, actors, and subsystems are important to consider. Due to federalism and devolution of responsibilities and authorities, environmental governance falls largely to the states. While the dynamics that shape state environmental budget policy have received scholarly interest, theoretically-driven examinations of environmental appropriations remain limited within the public budgeting and environmental policy literature.

Using panel data …

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 …

European Central Bank Tools And Policy Actions A: Open Market Operations, Collateral Expansion And Standing Facilities, Chase P. Ross, Rosalind Z. Wiggins, Andrew Metrick

Journal of Financial Crises

Beginning in August 2007, the European Central Bank (ECB) responded to market turmoil with a variety of standard and non-standard monetary policy tools. This case discusses the operational framework of the ECB’s open market operation tools and standing facilities before and during the financial crisis. Specifically, this case describes the ECB’s use of its main refinancing and longer-term refinancing operations, the expansion of collateral eligible for use in Eurosystem credit operations, and the ECB’s standing facilities, including its marginal lending and deposit facilities.

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

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 …

Jpmorgan Chase London Whale H: Cross-Border Regulation, Arwin G. Zeissler, Andrew Metrick

Journal of Financial Crises

As a global financial service provider, JPMorgan Chase (JPM) is supervised by banking regulatory agencies in different countries. Bruno Iksil, the derivatives trader primarily responsible for the $6 billion trading loss in 2012, was based in JPM’s London office. This office was regulated both by the Office of the Comptroller of the Currency (OCC) of the United States (US) and by the Financial Services Authority (FSA), which served as the sole regulator of all financial services in the United Kingdom (UK). Banking regulators in the US and the UK have entered into agreements with one another to define basic parameters …

Jpmorgan Chase London Whale C: Risk Limits, Metrics, And Models, Arwin G. Zeissler, Andrew Metrick

Journal of Financial Crises

Value at Risk (VaR) is one of the most commonly used ways to measure and monitor market risk. At JPMorgan Chase (JPM), very large derivative positions established by Bruno Iksil in the Synthetic Credit Portfolio (SCP) caused the bank’s Chief Investment Office (CIO) to exceed its VaR limit for four days in a row in January 2012. In response, the CIO changed to a new VaR model on January 30, which appeared to immediately reduce VaR by half. However, JPM soon discovered that this new VaR model had not been properly implemented and the bank went back to using the …

Jpmorgan Chase London Whale B: Derivatives Valuation, Arwin G. Zeissler, Andrew Metrick

Journal of Financial Crises

After consistently producing positive results through 2011, the JPMorgan Chase (JPM) traders who oversaw the bank’s Synthetic Credit Portfolio (SCP) grew alarmed by a consistent string of losses beginning in January 2012. (The SCP was maintained by JPM to help hedge default risk and was the source of the 2012 London Whale trading loss.) To minimize the losses reported to their superiors until such time that market prices hopefully turned in their favor, the SCP traders began valuing their largest derivative positions in a manner that was not consistent with Generally Accepted Accounting Principles (GAAP) and JPM policy. The fair …

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 …

New Jersey Urban Enterprise Zone Program Assessment 2019, Thomas Edison State University, Pel Analytics, Anderson Economic Group, The John S. Watson Institute For Public Policy

Urban Mayors Policy Center

In 2019, the State of New Jersey sought an evaluation of its Urban Enterprise Zone (UEZ) Program to determine the program’s economic impact and make recommendations for the program’s future. The John S. Watson Institute of Public Policy of Thomas Edison State University joined with PEL Analytics and Anderson Economic Group to produce the following study. The main recommendation of this analysis is to retain the UEZ Program while instituting various changes to make it stronger. Recommended changes in brief include reinstating some form of Zone Assistance Funds (ZAFs), creating a better system to collect data and track outcomes, assisting …

The Effects Of Natural Resource Dependence And Democracy On The Incremental Budgeting Theory And Punctuated Equilibrium Within A Budgetary Context, Barrak Ghanim Algharabali

Theses and Dissertations--Public Policy and Administration

I contribute to the literature by providing additional factors that could affect the incremental budgeting theory and punctuated equilibrium theory (PET) within a budgetary context. Because of the fluctuation in the price of natural resources, I argue that dependence on natural resources could lead to less stable budgets than ones not dependent on natural resources. I also argue that democracy is another source that leads to stability in the budget, relative to countries that are not democratic. I theorize that countries with no democracy and heavy dependence on natural resources will have budgets with more volatility than the rest of …