- 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
Dodd–Frank Act Policies to Address Connectedness
Dodd–Frank Act Policies to Address Connectedness
- Chapter:
- (p.59) 6 Dodd–Frank Act Policies to Address Connectedness
- Source:
- Connectedness and Contagion
- Author(s):
Hal S. Scott
- Publisher:
- The MIT Press
The Dodd–Frank Act was the principal response of the United States to the 2008 financial crisis. Despite the fact that the crisis actually had little to do with asset connectedness, many of the most important provisions of the Act are addressed to this form of systemic risk. This is not to say these policies are bad and may not address potential problems in the future, but contagion was the major problem in the crisis, and Dodd–Frank made this problem worse, not better. This chapter discusses some key provisions of Dodd–Frank that address connectedness: (1) the requirement for central clearing of over-the-counter derivatives; (2) the imposition of counterparty exposure limits; and (3) the designation of systemically important nonbank financial institutions.
Keywords: Dodd–Frank Act, financial policy, 2008 financial crisis, systemic risk, central clearing, over-the-counter derivatives, exposure limits, financial institutions, connectedness
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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
