Macroeconomics Commons^™

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 A: Regulatory History, Christian M. Mcnamara, Thomas Piontek, Andrew Metrick

Journal of Financial Crises

From the earliest efforts to mandate the amount of capital banks must maintain, regulators have grappled with how best to accomplish this task. Until the 1980s, regulation had been based largely on discretion and judgment. In the wake of two bank failures, the central bank governors of the G10 countries established the Basel Committee on Banking Supervision (BCBS) and in 1988, the BCBS introduced a capital measurement system, Basel I. The system represented a triumph of the fixed numerical approach, however, critics worried that it was too blunt an instrument. In 1999, the BCBS issued Basel II, a proposal to …

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 …

From Muhammed To The Jobup: Engaging Malemployed Immigrants Through Journalism, Tiziana Rinaldi

Capstones

I focused my graduate work on the local community of malemployed immigrants. They are foreign-educated newcomers — medical doctors, pharmacists, teachers, lawyers and engineers, to name a few of their professions — who lack the resources to find skill- appropriate work in the U.S. They end up either unemployed or working at "jobs for which they’re overqualified or overeducated or both,” I wrote for NJSpotlight in 20171.

Using the social journalism method2 of engaging members of a chosen group to fill important if not crucial information gaps, I developed The JobUp, a series of free, offline educational events, as my …

European Banking Union C: Cross-Border Resolution–Fortis Group, Rosalind Z. Wiggins, Natalia Tente, Andrew Metrick

Journal of Financial Crises

In August 2007, Fortis Group, Belgium’s largest bank, acquired the Dutch operations of ABN AMRO, becoming the fifth largest bank in Europe. Despite its size and its significant operations in the Benelux countries, Fortis struggled to integrate ABN AMRO. Fortis’s situation worsened with the crash of the US subprime market, which impacted its subprime mortgage portfolio. By July 2008, Fortis’s CEO had stepped down, its stock had lost 70% of its value, and it was on the verge of collapse due to a severe liquidity crisis. The governments of Belgium, Luxembourg, and the Netherlands quickly came together and agreed to …

European Banking Union A: The Single Supervisory Mechanism, Rosalind Z. Wiggins, Michael Wedow, Andrew Metrick

Journal of Financial Crises

At the peak of the Global Financial Crisis in fall 2008, each of the 27 member states in the European Union (EU) set many of its own banking rules and had its own bank regulators and supervisors. The crisis made the shortcomings of this decentralized approach obvious, and since its formation in January 2011, the European Banking Authority (EBA) has been developing a “Single Rulebook” that will harmonize banking rules across the EU countries. In June 2012, European leaders went even further, committing to a banking union that would better coordinate supervision of banks in the then 18-country Eurozone. A …

European Central Bank Tools And Policy Actions B: Asset Purchase Programs, Chase P. Ross, Rosalind Z. Wiggins, Andrew Metrick

Journal of Financial Crises

Beginning in August 2007, the European Central Bank (ECB) used standard and non-standard monetary policies as the global financial markets progressed from initial turmoil to a widespread sovereign debt crisis. This case describes the key features of the ECB’s asset purchase programs throughout the Global Financial Crisis and subsequent European sovereign debt crisis. These programs include the Covered Bond Purchase Programs (CBPP1, CBPP2, CBPP3), Securities Markets Program (SMP), Outright Monetary Transactions (OMT), Asset-backed Securities Purchase Program (ABSPP) and the Public Sector Purchase Program (PSPP).

In combating the crises, the ECB designed various innovative programs which it successively employed as the …

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 D: Similarities And Differences, Arwin G. Zeissler, Daisuke Ikeda, Andrew Metrick

Journal of Financial Crises

On September 29, 2008—two weeks after the collapse of Lehman Brothers—the government of Ireland took the bold step of guaranteeing almost all liabilities of the country’s major banks. The total amount guaranteed by the government was more than double Ireland’s gross domestic product, but none of the banks were immediately nationalized. The Icelandic banking system also collapsed in 2008, just one week after the Irish government issued its comprehensive guarantee. In contrast to the Irish response, the Icelandic government did not guarantee all bank debt. Instead, the Icelandic government controversially split each of the three major banks into a new …

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 …

The Impact Of Legalization Of Marijuana On Opioid Overdose Deaths, Radhika N. Bharadwaj

Theses and Dissertations

This masters’ thesis aims to examine the impact of the legalization of marijuana for recreational use on the death toll from opioid misuse in the state of Colorado. This investigation was done using the Synthetic Controls Method via data collected primarily from the CDC and IPUMS databases. The results indicate that the 2012 legalization policy in Colorado appears to reduce the number of deaths due to opioid overdoses.

Considerations For Mexican Immigration Policy Reform: How Motivations To Migrate Align With U.S. And Mexican Macroeconomic Conditions, Alix Naugler

Undergraduate Honors Theses

The nationalistic rhetoric adopted by the newly-elected president’s administration along with the public’s climaxing anti-immigrant hysteria has recently forced Mexican immigration intervention to the top of the U.S. agenda. Misconceptions regarding Mexicans’ role in stealing jobs, threatening cultural and ethnic traditions, and straining public welfare, educational, and healthcare resources have spurred a fear among the American people. This politically-fabricated “schizophrenia” has ceased the political and economic collaboration between the two nations and has resulted in the unilateral militarization of the U.S.-Mexico border. In this evaluation of the U.S. government’s immigration policies, the proposed economic theories related to Mexicans’ motivations in …

Fossil Fuel Subsidies: Impacts And Reform Strategies, Jennifer E. Good

CMC Senior Theses

This thesis uses cross-country panel regressions to identify the effects of fossil-fuel subsidies for both oil importers and oil exporters on GDP growth, industry growth, crowding out of government expenditures in education, health, and infrastructure, government debt, carbon dioxide emissions, inequality and poverty. Fossil-fuel subsidies are found to be associated with lower levels of growth and industry growth, less government expenditure on health and education, poorer infrastructure quality, more government debt, and higher rates of carbon dioxide emissions. No relationship is found between fossil fuel subsidies and poverty and inequality. These results confirm the arguments of those that argue that …

The Effects Of Political Institutions On Public Budgeting, Andrew Burnos

Political Science Theses and Capstones

Economics around the globe has been a growing issue of late due to the current economic crisis. This study focuses on political institutional factors that influence spending in a particular country. The variables used in this study include Gross Domestic Product (GDP), Tax Revenue as Percent of GDP, and current account balance to name a few. This research looks at the relationship between proportional representation compared to majoritarian systems as well as presidential compared to parliamentary systems and how these relate to public budgeting. This research updates the analysis of Persson and Tabellini in their book The Economic Effects of …

La Génération Perdue: Youth Unemployment In France And The Policies Behind It, Katharine L. O'Kane

Senior Honors Projects

In the 1970s, the world began moving towards free market policies. Open borders, lower taxes, and market-based economies became more prominent as centrally planned governments declined in both number and significance. In order to participate in European trade and to enhance its global position, France also moved towards decentralization. French socialists became less concerned with centralized government, yet continued to preserve their strong national desire to protect French citizens. France experienced substantial growth in its employment costs during the 1980s. By the early 1990s, France introduced labor contracts that better defined the duration of employment. These contracts pressured French companies …

The Effect Of U.S. State Taxes On State Economic Prosperity, Casey Dainsberg

Political Science Theses and Capstones

Policy makers today are faced with trying to create solutions for economic troubles that become increasingly more complex and foreboding. Tax cuts and tax hikes are proposed and considered as possible solutions to various economic problems. However, the question still remains regarding which policies are most effective. The purpose of this research is to asses these competing claims. It seeks to find evidence that will shed light on one of these views. I have done this by accumulating tax and economic data from the fifty U.S. States between the years 2001-2009. Previous research has concluded that taxes do affect the …