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Bailouts and Systemic Insurance

2013-11-12 Business & Economics
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Release : 2013-11-12
Genre : Business & Economics
Kind : eBook
Book Rating : 63X/5 ( reviews)

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Book Synopsis Bailouts and Systemic Insurance by : Mr.Giovanni Dell'Ariccia

Download or read book Bailouts and Systemic Insurance written by Mr.Giovanni Dell'Ariccia. This book was released on 2013-11-12. Available in PDF, EPUB and Kindle. Book excerpt: We revisit the link between bailouts and bank risk taking. The expectation of government support to failing banks creates moral hazard—increases bank risk taking. However, when a bank’s success depends on both its effort and the overall stability of the banking system, a government’s commitment to shield banks from contagion may increase their incentives to invest prudently and so reduce bank risk taking. This systemic insurance effect will be relatively more important when bailout rents are low and the risk of contagion (upon a bank failure) is high. The optimal policy may then be not to try to avoid bailouts, but to make them “effective”: associated with lower rents.

Too Big to Fail

2003-12-30 Business & Economics
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Release : 2003-12-30
Genre : Business & Economics
Kind : eBook
Book Rating : 425/5 ( reviews)

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Book Synopsis Too Big to Fail by : Benton E. Gup

Download or read book Too Big to Fail written by Benton E. Gup. This book was released on 2003-12-30. Available in PDF, EPUB and Kindle. Book excerpt: Usually associated with large bank failures, the phrase too big to fail, which is a particular form of government bailout, actually applies to a wide range of industries, as this volume makes clear. Examples range from Chrysler to Lockheed Aircraft and from New York City to Penn Central Railroad. Generally speaking, when a corporation, an organization, or an industry sector is considered by the government to be too important to the overall health of the economy, it will not be allowed to fail. Government bailouts are not new, nor are they limited to the United States. This book presents the views of academics, practitioners, and regulators from around the world (e.g., Australia, Hungary, Japan, Europe, and Latin America) on the implications and consequences of government bailouts.

Bailouts

2010-02-04 Political Science
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Release : 2010-02-04
Genre : Political Science
Kind : eBook
Book Rating : 731/5 ( reviews)

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Book Synopsis Bailouts by : Robert E. Wright

Download or read book Bailouts written by Robert E. Wright. This book was released on 2010-02-04. Available in PDF, EPUB and Kindle. Book excerpt: Today's financial crisis is the result of dismal failures on the part of regulators, market analysts, and corporate executives. Yet the response of the American government has been to bail out the very institutions and individuals that have wrought such havoc upon the nation. Are such massive bailouts really called for? Can they succeed? Robert E. Wright and his colleagues provide an unbiased history of government bailouts and a frank assessment of their effectiveness. Their book recounts colonial America's struggle to rectify the first dangerous real estate bubble and the British government's counterproductive response. It explains how Alexander Hamilton allowed central banks and other lenders to bail out distressed but sound businesses without rewarding or encouraging the risky ones. And it shows how, in the second half of the twentieth century, governments began to bail out distressed companies, industries, and even entire economies in ways that subsidized risk takers while failing to reinvigorate the economy. By peering into the historical uses of public money to save private profit, this volume suggests better ways to control risk in the future. Additional Columbia / SSRC books on the privatization of risk and its implications for Americans: Health at Risk: America's Ailing Health System--and How to Heal ItEdited by Jacob S. Hacker Laid Off, Laid Low: Political and Economic Consequences of Employment InsecurityEdited by Katherine S. Newman Pensions, Social Security, and the Privatization of RiskEdited by Mitchell A. Orenstein

Too Big to Fail

2004-02-29 Business & Economics
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Release : 2004-02-29
Genre : Business & Economics
Kind : eBook
Book Rating : 366/5 ( reviews)

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Book Synopsis Too Big to Fail by : Gary H. Stern

Download or read book Too Big to Fail written by Gary H. Stern. This book was released on 2004-02-29. Available in PDF, EPUB and Kindle. Book excerpt: The potential failure of a large bank presents vexing questions for policymakers. It poses significant risks to other financial institutions, to the financial system as a whole, and possibly to the economic and social order. Because of such fears, policymakers in many countries—developed and less developed, democratic and autocratic—respond by protecting bank creditors from all or some of the losses they otherwise would face. Failing banks are labeled "too big to fail" (or TBTF). This important new book examines the issues surrounding TBTF, explaining why it is a problem and discussing ways of dealing with it more effectively. Gary Stern and Ron Feldman, officers with the Federal Reserve, warn that not enough has been done to reduce creditors' expectations of TBTF protection. Many of the existing pledges and policies meant to convince creditors that they will bear market losses when large banks fail are not credible, resulting in significant net costs to the economy. The authors recommend that policymakers enact a series of reforms to reduce expectations of bailouts when large banks fail.

Credit Insurance, Bailout and Systemic Risk

2018
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Release : 2018
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Kind : eBook
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Book Synopsis Credit Insurance, Bailout and Systemic Risk by : Kaushalendra Kishore

Download or read book Credit Insurance, Bailout and Systemic Risk written by Kaushalendra Kishore. This book was released on 2018. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies the impact of expectation of bailout of a credit insurance firm on the investment strategies of the counterparty banks. If the failure of credit insurance firm may result in the bankruptcy of its counterparty banks, then the regulator will be forced to bail it out. This imperfectly targeted time inconsistent policy incentivizes the banks to make correlated investments ex ante. All banks want their assets to fail exactly at the time when the bailout is occurring to indirectly benefit from the bailout of the insurance firm and hence they make correlated investments. I build a model in which correlated investment by banks, under priced insurance contracts and a systemically important insurance firm arise endogenously and show that while credit insurance helps in risk sharing during good times, it can also create systemic risk. I also show that putting a limit on size of insurance firm can mitigate this problem.

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