It is challenging to explain the collapse in the price of subprime mortgage-backed securities (MBS) during the Financial Crisis of 2008, using the existing models of fire-sale. I present a model to demonstrate that fire-sales may happen even when there is a relatively sizable pool of natural buyers and in the absence of asymmetric information, due to a coordination failure among buyers: buyers’ waiting to trade at a lower price tomorrow, can lead to a collapse in the price and trade volume today. In particular, I show that when trade is decentralized and participation is endogenous, a medium level of asset demand and liquidity needs that are ex-pected to increase over time create complementarity among buyers’ decisions to wait. This complementarity makes competitive markets prone to coordination failures and fire-sales accompanied by a collapse in the trade volume. Fire-sales may also be inefficient. I also discuss various policy options to eliminate the risk of fire-sales in such a setup.

With historical and comparative method, this book explores financial disintermediation which besets both the United States and China and extends the thinking up to the evolutional trend of capitalism and socialism. Different from the previous research, this book delves into the first cause which induces financial disintermediation, namely the basic deficiency of capitalism: liquidity crisis, and the countermeasures which various institutional systems have taken for dealing with it. The conclusion reveals that the upheaval was initiated from the founding of financial safety net. During the Great Depression, by adopting financial safety net, the previous evolving track of American financial system was ended, and a new path launched – financial disintermediation. The starting point for China was the setout of “the reform and opening-up”. In the West, financial safety net formulates a dualistic regulatory regime, which spurred financial disintermediation. Severe financial disintermediation has led up to a series of thorny issues, including the resurgence of liquidity crisis, the financialization of the economy, and too-big-to-fail, and debt overhang and widening wealth disparity and so on. In China, the main difference with its western counterpart should be the replacement of asset quality deterioration in financial system to liquidity crisis. The root problem lies in that some matched institutions needed for guaranteeing its positive effects are desperately absent or weak, so it is a must to strengthen them, and steadfastly arrest financial disintermediation simultaneously. For that, both regimes should learn from each other.

This is a print on demand edition of a hard to find publication. Examines the impact of the financial crisis of 2008, specifically the bankruptcy of Lehman Brothers, on the federal funds market. Rather than a complete collapse of lending in the presence of a market-wide shock, banks became more restrictive in their choice of counter-parties. Following the Lehman bankruptcy, amounts and spreads became more sensitive to a borrowing bank¿s characteristics. While the market did not contract dramatically, lending rates increased. Further, the market did not seem to expand to meet the increased demand predicted by the drop in other bank funding markets. The authors examine discount window borrowing as a proxy for unmet fed funds demand and find that the fed funds market is not indiscriminate. Illustrations.

Financial regulation can fail when it is needed the most. The dynamics of asset price bubbles weaken financial regulation just as financial markets begin to overheat and the risk of crisis spikes. At the same time, the failure of financial regulations adds further fuel to a bubble. This book examines the interaction of bubbles and financial regulation. It explores the ways in which bubbles lead to the failure of financial regulation by outlining five dynamics, which it collectively labels the "Regulatory Instability Hypothesis." . The book concludes by outlining approaches to make financial regulation more resilient to these dynamics that undermine law.

The financial crisis of 2008 devastated the American economy and caused U.S. policymakers to rethink their approaches to major financial crises. More than five years have passed since the collapse of Lehman Brothers, but questions still persist about the best ways to avoid and respond to future financial crises. In Across the Great Divide, a co-publication with Brookings Institution, contributing economic and legal scholars from academia, industry, and government analyze the financial crisis of 2008, from its causes and effects on the U.S. economy to the way ahead. The expert contributors consider post-crisis regulatory policy reforms and emerging financial and economic trends, including the roles played by highly accommodative monetary policy, securitization run amok, government-sponsored enterprises (GSEs), large asset bubbles, excessive leverage, and the Federal funds rate, among other potential causes. They discuss the role played by the Federal Reserve and examine the concept of "too big to fail." And they review and assess resolution frameworks, considering experiences with Lehman Bros. and other firms in the crisis, Title II of the Dodd-Frank Act, and the Chapter 14 bankruptcy code proposal.

The index fund wouldn’t be jack without Jack. It was just one innovation fueled by The Vanguard Group founder Jack Bogle’s radical idea in 1975 to make investors the actual owners of his new fund company. While the move was as much to save his job as it was to save investors, the end result was powerful: a fund company for the people and by the people. Bogle began a 50-year process of lowering costs inch by inch, which ultimately unleashed a populist revolt that has saved average investors trillions of dollars while reforming and right-sizing much of the entire financial industry. Today, nearly every dollar invested in America goes to either Vanguard funds or Vanguard-influenced funds. But Bogle’s impact and this “great cost migration” reaches well beyond index funds into many other areas, such as active management, ETFs, the advisory world, quantitative investing, ESG, behavioral finance and even trading platforms. The Bogle Effect takes readers through each of these worlds to show how they—and the investors they serve—are being reshaped and reformed. While hundreds of fund providers have copied the index fund that Vanguard made popular no one is yet to copy its “mutual” ownership structure. Why? This book explores that question as well as what made Bogle such an anomaly—seemingly immune to the overwhelming magnet of ambition that dictates Wall Street, made famous by movies like Wall Street, The Big Short, and The Wolf of Wall Street. On the flip side, Bogle wasn’t perfect by any stretch—he could be moralizing, cantankerous, and tended to make virtue out of necessity. The Bogle Effect is animated by the author’s hours of one-on-one, exclusive interviews with Bogle in the years before he passed, which reveal his philosophy, vision, intellect, and humor. Dozens of additional interviews with people who worked with him, lived with him, were influenced by him, and disagreed with him round out a portrait of this revolutionary figure. You will never look at the financial industry or your portfolio the same way again.

Despite ongoing economic recovery and improvements in global financial stability, structural weaknesses and vulnerabilities remain in some important financial systems. The April 2011 Global Financial Stability Report highlights how risks have changed over the past six months, traces the sources and channels of financial distress with an emphasis on sovereign risk, notes the pressures arising from capital inflows in emerging economies, and discusses policy proposals under consideration to mend the global financial system.