Too Big to Bail: The "Paulson Put," Presidential Politics, and the Global Financial Meltdown

Ferguson, Thomas S.; Johnson, Robert

doi:10.2753/ijp0891-1916380101

“…This new institutional configuration facilitated a further reorientation of financial governance, as the ability of banks to create credit outside of the central bank's regulatory capacity was no longer the source of anxiety that it had been before. The Federal Reserve now began to use interest rate to proactively relieve liquidity pressures on large financial institutions (Ferguson & Johnson, 2010;Watson, 2014); it enhanced insurance for the key nodes of the payments system; and the growth of the government-sponsored enterprises and the infrastructure of securitization techniques supported had similar effects. The new approach that emerged recognized that crises were likely to continue to occur periodically and that the use of bailouts could not be ruled out and that the aim should be to manage their application and minimize their undesirable side effects.…”

Section: Neoliberal Reasonmentioning

confidence: 99%

The Routledge Handbook of Critical Finance Studies

Borch¹,

Wosnitzer²

2020

6

0

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There has been an increasing interest in financial markets across sociology, history, anthropology, cultural studies, and related disciplines over the past decades, with particular intensity since the 2007-2008 crisis which prompted new analyses of the workings of financial markets and how "scandals of Wall Street" might have huge societal ramifications. The sociologically inclined landscape of finance studies is characterized by different more or less wellestablished homogeneous camps, with more micro-empirical, social studies of finance approaches on the one end of the spectrum and more theoretical, often neo-Marxist approaches, on the other.Yet alternative approaches are also gaining traction, including work that emphasizes the cultural homologies and interconnections with finance as well as work that, more broadly, is both empirically rigorous and theoretically ambitious. Importantly, across these various approaches to finance, a growing body of literature is taking shape which engages finance in a critical manner.The term "critical finance studies" nonetheless remains largely unfocused and undefined. Against this backdrop, the key rationales of The Routledge Handbook of Critical Finance Studies are firstly to provide a coherent notion of this emergent field and secondly to demonstrate its analytical usefulness across a wide range of central aspects of contemporary finance.As such, the volume will offer a comprehensive guide to students and academics on the field of Finance and Critical Finance Studies, Heterodox Economics, Accounting, and related Management disciplines.

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“…The existence of such a plan promises to make the threat of putting an insolvent institution into receivership or conservatorship more credible to creditors and counterparties because it promises to lower the costs of executing a takeover. Unlike the chaotic and ineffective haggling observed in addressing the insolvencies of Lehman Brothers and AIG in September 2008 (Ferguson and Johnson, 2009), having a benchmark winding-up scheme in place would make it much easier for authorities to dilute the claims of zombie stockholders and to negotiate haircuts with uninsured creditors.…”

Section: Joint Private-sector and Governmental Reformsmentioning

confidence: 99%

Redefining and Containing Systemic Risk

Kane

¹

2010

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Official definitions of systemic risk leave out the role of government officials in generating it. Policymakers' support of creative forms of risk-taking and their proclivity for absorbing losses in crisis situations encourage opportunistic firms to foster and exploit incentive conflicts within the supervisory sector. To restore faith in the diligence, competence, and integrity of officials responsible for managing the financial safety net, reforms need to rework incentives in the government and financial sectors. The goal should be to align the incentives of private risk managers, accountants, credit-rating firms, and government supervisors with those of ordinary taxpayers. This article describes a series of complementary ways of advancing toward this goal. The most important steps would be to measure regulatory performance in terms of its effect on the loss exposures that the safety net passes through to taxpayers and to require institutions that benefit from the net to produce information that would support this effort. This entails estimating the explicit and implicit safety-net benefits individual institutions receive and issuing extended-liability securities whose prices would improve the accuracy of these estimates.

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Redefining and Containing Systemic Risk

Kane

¹

2010

Financial Market Regulation

3

0

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Official definitions of systemic risk leave out the role of government officials in generating it. Policymakers' support of creative forms of risk-taking and their proclivity for absorbing losses in crisis situations encourage opportunistic firms to foster and exploit incentive conflicts within the supervisory sector. To restore faith in the diligence, competence, and integrity of officials responsible for managing the financial safety net, reforms need to rework incentives in the government and financial sectors. The goal should be to align the incentives of private risk managers, accountants, credit-rating firms, and government supervisors with those of ordinary taxpayers. This article describes a series of complementary ways of advancing toward this goal. The most important steps would be to measure regulatory performance in terms of its effect on the loss exposures that the safety net passes through to taxpayers and to require institutions that benefit from the net to produce information that would support this effort. This entails estimating the explicit and implicit safety-net benefits individual institutions receive and issuing extended-liability securities whose prices would improve the accuracy of these estimates.

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Too Big to Bail: The "Paulson Put," Presidential Politics, and the Global Financial Meltdown

Cited by 35 publications

References 26 publications

The Routledge Handbook of Critical Finance Studies

The Routledge Handbook of Critical Finance Studies

Redefining and Containing Systemic Risk

Redefining and Containing Systemic Risk

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