Stern on Finance

A proposal to prevent wholesale financial failure by Lasse H. Pedersen and Nouriel Roubini

Wed, 18 Feb 2009 23:21:00 +0000

The worst financial crisis since the Great Depression has highlighted the risks from the collapse of systemically important financial institutions. Huge bail-outs were undertaken based on a fear that...

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Restoring Financial Stability by Viral V Acharya and Matthew Richardson

Fri, 13 Feb 2009 00:45:00 +0000

There are many cracks in the financial system, some of which we now know, others no doubt we will discover down the road. The eighteen white papers and executive summaries of each chapter of New York...

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Expect Even More Shadow Banking Losses by Viral V Acharya and Philipp Schnabl

Wed, 04 Feb 2009 02:41:00 +0000

Off-balance sheet vehicles exacerbate the crisis... On January 19, the Royal Bank of Scotland (RBS) revealed a record-setting loss: its $41bn write-down was the largest loss in UK history. After...

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Good Bank, Bad Bank; Good Plan, Better Plan, by Max Holmes

Tue, 03 Feb 2009 20:43:00 +0000

There is a growing consensus that Washington has two options if it wants to end the credit freeze and restore confidence in our banking system. One is to, in effect, nationalize the major banks,...

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Why government guarantees are a double-edged sword, by Viral V Acharya and Julian Franks

Fri, 30 Jan 2009 20:38:00 +0000

As the search goes on for culprits and remedies in the global financial crisis, not enough attention has focused on the role played by governments in explicitly or implicitly guaranteeing the banking...

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Are Bankers Over-Paid? - Thomas Philippon

Wed, 21 Jan 2009 03:30:00 +0000

Employees of the financial industry have enjoyed very high compensation in recent years. The bonuses of Wall Street reached more than $200,000 per employee in 2007. Bonuses fell in 2008 but remain...

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Government money should have strings attached - Viral Acharya, David Backus, and Raghu Sundaram

Tue, 06 Jan 2009 16:11:00 +0000

There's a tendency in a crisis to throw out the rulebook: we're in a unique situation, some will say, and that calls for unique measures. In fact, financial crises are recurring events whose...

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Where should the bailout stop? And what to do about GM - Edward Altman and Thomas Philippon

Fri, 12 Dec 2008 14:49:00 +0000

The massive US Government bailout originally intended for the financial industry has now spread to the non-financial sector, and the government is considering bailing out car manufacturers. This is...

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Time to Lift the Veil - Viral V Acharya and Marti G Subrahmanyam

Thu, 13 Nov 2008 17:39:00 +0000

A clearinghouse for credit derivatives trading? The severe stress in the credit derivatives markets since the inception of the sub-prime crisis has been reported in great detail in the financial...

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Citi, Goldman, Too-Big-to-Fails, Need New Rules - Roy C. Smith

Wed, 12 Nov 2008 13:56:00 +0000

Nov. 10 (Bloomberg) -- Federal Reserve Chairman Ben Bernanke recently told the Economic Club of New York that the U.S. faces “a very serious too-big-to-fail problem.” As Bernanke described it, this...

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Should GM/Chrysler File for Bankruptcy? - Edward I. Altman

Wed, 05 Nov 2008 16:37:00 +0000

All this talk about a government rescue of General Motors and other automakers is misguided, likely a waste of taxpayers' money and a potential further diminution in the creditworthiness of the U.S....

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One cheer for the Securities and Exchange Commission - Joel Hasbrouck

Tue, 04 Nov 2008 14:53:00 +0000

The Securities and Exchange Commission has come under much criticism in the current financial crisis. Many of the problems have indeed arisen in its bailiwick. It was the principal regulator of Bear...

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Assessing Proposed Solutions to Bias in Credit Ratings - Vasiliki Skreta and Laura Veldkamp

Fri, 31 Oct 2008 15:29:00 +0000

Most market observers attribute the recent credit crunch to a confluence of factors: lax screening by mortgage originators, improperly estimated correlation between bundled assets, market-distorting...

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Forecasting Default Rates: A Tricky Business - Edward I. Altman

Tue, 28 Oct 2008 17:31:00 +0000

In this paper, we introduce two new market based methods for estimating the one year hence default rate on high-yield corporate bonds. Observing our two market-based measures for forecasting default...

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The other part of the bailout: Pricing and evaluating the US and UK loan guarantees - Viral V. Acharya and Raghu Sundaram

Sun, 26 Oct 2008 14:48:00 +0000

Apart from taking equity stakes in selected financial institutions, the recent attempts to thaw financial markets also involve government guarantees on newly-issued senior unsecured debt of banks, an...

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Retirement Planning in the Aftermath of the Crisis - Anthony Lynch

Thu, 23 Oct 2008 11:23:00 +0000

An important issue facing investors as the economy emerges from the current financial crisis is what they should do with their retirement accounts. Going forward, investors should not drastically...

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Credit Default Swaps are Good for You (but Require an Exchange of Their Own)

Wed, 22 Oct 2008 19:10:00 +0000

This op-ed piece by Stephen Figlewski and Roy Smith was published on Forbes.com. It can be accessed at the URL: Credit Default Swaps are Good for You

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After the Wreckage: What's Next for Universal Banks? - Roy C Smith and Ingo Walter

Wed, 22 Oct 2008 12:00:00 +0000

The dramatic actions in the last few days of the European and American central banks and treasuries suggest the beginning of the end of the global debt crisis. Some of them, especially the partial...

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Credit Derivatives, Crises, and Clearing Houses - Joel Hasbrouck

Tue, 21 Oct 2008 20:38:00 +0000

To bring order to chaos in group activity, it is not uncommon to suggest a clearing house, i.e., a vehicle for sharing information to improve coordination. The recent financial crisis provides such...

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The Subprime Mortgage Crisis: Could We Have Seen It Coming? - Otto Van Hemert

Mon, 20 Oct 2008 00:48:00 +0000

I take a close look at the history of subprime mortgage loans between 2001 and 2007 to see if there was any pattern evident that could have led people to foresee, and thus forestall, the crisis that...

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The Housing Crisis and its Effects on Aggregate Consumption - Stijn Van Nieuwerburgh

Sun, 19 Oct 2008 20:17:00 +0000

In this short post, I review the data on the rise and fall in residential housing wealth and try to quantify its effect on aggregate consumption. This is an important question in gauging the depth...

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The Role of Hedge Funds in Financial Crises - Stephen Brown

Fri, 17 Oct 2008 03:21:00 +0000

On October 2, the U.S. House Oversight and Government Reform Committee announced a Hearing on Regulation of Hedge Funds scheduled for Thursday, November 13, 2008. The focus is on the causes and...

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The future of the financial industry - Thomas Philippon

Thu, 16 Oct 2008 15:50:00 +0000

In 2006 (long before the crisis started), I was working on a project to understand the evolution of the U.S. financial industry. I concluded that its growth seemed to reflect fundamental economic...

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Banking has been a political issue for more than two centuries - Richard Sylla

Thu, 16 Oct 2008 10:31:00 +0000

Banking has been a highly politicized business throughout American history. With the U.S. Treasury now planning to inject $250 billion of equity capital into our banks, the business may well become...

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Liquidity risk and the current crisis - Lasse H. Pedersen

Wed, 15 Oct 2008 20:48:00 +0000

What is liquidity risk and how can it help us understand the current crisis? How do we solve the crisis - and which measures will only hurt? I provide some answers based on a talk I am giving at the...

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