- Title Pages
- Dedication
- Acknowledgments
- Introduction
-
I Connectedness, Contagion, and Correlation: Definitions and a Review of the Economic Literature -
1 The Concept of Connectedness -
2 The Concept and History of Contagion -
3 The Concept of Correlation -
II Connectedness in the Crisis -
4 Asset Connectedness: Lehman and AIG -
5 Liability Connectedness: Money Market Funds and Tri-Party Repo Market -
6 Dodd–Frank Act Policies to Address Connectedness -
III Contagion -
7 Contagion in the 2008 Crisis: The Run on the Nonbank Sector, “Shadow Banks” -
8 History of Lender of Last Resort in the United States -
9 Dodd–Frank Restrictions on the Lender-of-Last-Resort Power -
10 Comparison of LLR Powers of Fed with Bank of England, European Central Bank, and Bank of Japan -
11 Strengthening the LLR Powers of the Fed -
12 Liability Insurance and Guarantees -
13 Insuring Money Market Funds -
IV Ex ante Policies to Avoid Contagion: Capital, Liquidity, Resolution, Money Market Mutual Fund Reform, and Limits on Short-Term Funding -
14 Capital Requirements: Basel III Framework -
15 Liquidity Requirements -
16 Bank Resolution Procedures, Contingent Capital (CoCos), and Bail-Ins -
17 Dodd–Frank Orderly Liquidation for Nonbank SIFIs (Including Bank Holding Companies) -
18 Living Wills -
19 Money Market Mutual Fund Reform -
20 Dependence of the Financial System on Short-Term Funding -
21 Government Crowding Out of Private Issuance of Short-Term Debt -
V Public Capital Injections into Insolvent Financial Institutions -
22 Capital Purchase Program and Other TARP Support Programs -
23 Criticisms of Bailouts Generally -
24 Specific Criticisms of TARP -
25 Standing Bailout Programs -
26 Conclusion - Appendix
- Index
Strengthening the LLR Powers of the Fed
Strengthening the LLR Powers of the Fed
- Chapter:
- (p.137) 11 Strengthening the LLR Powers of the Fed
- Source:
- Connectedness and Contagion
- Author(s):
Hal S. Scott
- Publisher:
- The MIT Press
This chapter focuses on ways to strengthen the Fed's role as lender of last resort (LLR). The first approach is to follow the lead of other central banks by dividing LLR powers between normal times through the discount window and special times through emergency procedures, rather than dividing lending authority up between banks and nonbanks. Second, there should be a more flexible and clearer policy about collateral for emergency assistance. A third reform would be to abandon the ad hoc nature of decision making about when to lend by adopting an advance commitment approach. A fourth reform of LLR could be to consider opening LLR facilities to mutual market funds (MMFs), given the dangers of MMF runs. A fifth point of reform is to give the Fed free and complete access to supervisory information collected by other regulators that bears on solvency. The fragmented regulatory structure contributes to the Fed's incomplete picture of the financial system. The LLR capabilities of the Fed would be strengthened by better regulatory coordination and collection of information, without necessarily increasing the regulatory authority of the Fed.
Keywords: lender of last resort, Federal Reserve, financial policy, mutual market funds, financial regulation, regulatory reform, monetary policy
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- Title Pages
- Dedication
- Acknowledgments
- Introduction
-
I Connectedness, Contagion, and Correlation: Definitions and a Review of the Economic Literature -
1 The Concept of Connectedness -
2 The Concept and History of Contagion -
3 The Concept of Correlation -
II Connectedness in the Crisis -
4 Asset Connectedness: Lehman and AIG -
5 Liability Connectedness: Money Market Funds and Tri-Party Repo Market -
6 Dodd–Frank Act Policies to Address Connectedness -
III Contagion -
7 Contagion in the 2008 Crisis: The Run on the Nonbank Sector, “Shadow Banks” -
8 History of Lender of Last Resort in the United States -
9 Dodd–Frank Restrictions on the Lender-of-Last-Resort Power -
10 Comparison of LLR Powers of Fed with Bank of England, European Central Bank, and Bank of Japan -
11 Strengthening the LLR Powers of the Fed -
12 Liability Insurance and Guarantees -
13 Insuring Money Market Funds -
IV Ex ante Policies to Avoid Contagion: Capital, Liquidity, Resolution, Money Market Mutual Fund Reform, and Limits on Short-Term Funding -
14 Capital Requirements: Basel III Framework -
15 Liquidity Requirements -
16 Bank Resolution Procedures, Contingent Capital (CoCos), and Bail-Ins -
17 Dodd–Frank Orderly Liquidation for Nonbank SIFIs (Including Bank Holding Companies) -
18 Living Wills -
19 Money Market Mutual Fund Reform -
20 Dependence of the Financial System on Short-Term Funding -
21 Government Crowding Out of Private Issuance of Short-Term Debt -
V Public Capital Injections into Insolvent Financial Institutions -
22 Capital Purchase Program and Other TARP Support Programs -
23 Criticisms of Bailouts Generally -
24 Specific Criticisms of TARP -
25 Standing Bailout Programs -
26 Conclusion - Appendix
- Index
