April 2011

Desperately seeking collateral

The Term Securities Lending Facility (TSLF) was one of the bigger (in dollar terms) emergency programs implemented by the Fed during the crisis of 2008. With increasing data available about how the programs were run, we are learning more about how about the financial system worked before the crisis, and how exactly it broke.

My last post gave some context for TSLF; this one uncovers more of the details. Read more

Exit Strategy, or New Normal

War Reparations, or Prosperity

In September 2008, when the Fed first began to expand its balance sheet while the U.S. Congress dithered over TARP, I likened what was happening to war finance. Read more

After QE2, what then?

And what was QE about anyway?

Now that the end of QE2 is in sight, everyone is wondering what happens next. Is a QE3, focused perhaps on outright purchase of municipal bonds, in the offing? Or will we once again start hearing about “exit strategy”? Read more

TSLF and the price of good collateral

In my last post I argued that if we want a Fed that is ready for the next crisis, we had better understand what happened to it during the last one. Perry, Dave Grad and I have just wrapped up a paper on the subject. Now I'm using the liquidity program transaction data, released in December 2010, to flesh out that work. I will post interim results here.

TSLF is a good place to start. Read more

The Future of the Fed

The Fed changed over the course of the global financial crisis. This graph tells a big part of the story. It's the asset side of the Federal Reserve's balance sheet, from just before the crisis through the present. Read more

Regulating the Shadow Banking System

(Way) Beyond Diamond-Dybvig

The problem with Dodd-Frank, and with Basel III as well, is that they start with the banking system, not the shadow banking system.

Give credit where credit is due. Everyone (I hope) now appreciates that so-called “microprudential” safeguards are not enough, and this is so even if we extend the traditional focus on solvency (capital adequacy) to include also liquidity.

“Macroprudential” safeguards are needed also, to put bounds on the apparent instability of the system as a whole. Everyone says it, but what does it mean?

Read more