DOCSLIB.ORG

Financial Crisis and Public Policy by Jagadeesh Gokhale

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Financial Crisis and Public Policy by Jagadeesh Gokhale 361497_PA364_1stClass:361497_PA364_1stClass 3/12/2009 9:08 AM Page 1 No. 634 March 23, 2009 Financial Crisis and Public Policy by Jagadeesh Gokhale Executive Summary This Policy Analysis explains the antecedents its implementation appears panicky—marked by of the current global financial crisis and critical- a knee-jerk trial-and-error process that may have ly examines the reasoning behind the U.S. heightened market uncertainty. Worse, current Treasury and Federal Reserve’s actions to prop interventions in market processes and institu- up the financial sector. It argues that recovery tions could become permanent, to the probable from the financial crisis is likely to be slow with detriment of the nation’s long-term economic or without the government’s bailout actions. prospects. With or without the bailout, the An oil price spike and a wealth shock in hous- ongoing recession is likely to be deep and long. ing initiated the financial crisis. Declines in From a philosophical perspective, any bailout stock values are intensifying that shock, threat- action provides a host of bad incentives. ening to deepen the current recession as U.S. Moreover, we should be mindful that future gen- consumers and investors cut their expenditures. erations already face massive debt burdens from An offsetting wealth injection from additional entitlement programs. Increasing those burdens risk-bearing investors could initiate a quicker by expanding the bailout program or enacting a recovery. Thus, supporters of government inter- massive fiscal stimulus will hasten the long- vention justify the bailout’s debt-financed fund anticipated crisis in entitlement programs. Thus, injections—in essence, they want to compel the ongoing economic crisis could usher in per- future taxpayers to join the group of today’s risk- manently higher taxes, greater government bearing investors. involvement in the private sector, and a pro- However, the bailout is poorly designed and longed period of slower economic growth. _____________________________________________________________________________________________________ Jagadeesh Gokhale is a senior fellow at the Cato Institute and author of Social Security: A Fresh Look at Reform Alternatives (forthcoming). PA Masthead.indd 1 2/9/06 2:08:34 PM 361497_PA364_1stClass:361497_PA364_1stClass 3/12/2009 9:08 AM Page 2 From a This Policy Analysis, however, examines the philosophical Introduction bailout from an economic perspective. Skep- tics of the bailout believe that struggling finan - perspective, any In October 2008, Congress approved a pro - cial firms should be left to fall into bankruptcy. bailout action posal by Bush administration Treasury secre - They believe that the sooner those firms col - provides a host of tary Henry Paulson and Federal Reserve chair - lapse and their assets are purchased by healthi - man Ben Bernanke to spend up to $700 billion er competitors, the sooner the financial sector bad incentives. of government funds to shore up the U.S. can restructure itself to restore normal credit financial system. The plan initially envisioned flows that are vital to maintaining the broader using those funds to buy financial assets— economy’s health over the long term. From this mostly mortgage-backed securities held by perspective, the congressional bailout plan will banks and other financial institutions—that only delay proper asset revaluation and have lost value in the wake of the housing bub - resumption of normal credit flows. Thus, it will ble. Uncertainties about how far home prices prolong the recession triggered by the bursting will continue to decline and about the likeli - of the housing bubble as government interven - hood of future mortgage defaults have made tion slows needed structural adjustments in those securities “toxic.” Financial market par - the financial sector. 1 Unless market forces are ticipants’ unwillingness to lend to or trade with allowed to eliminate insolvent financial com - institutions holding large amounts of such panies through bankruptcy, restructuring, and securities—especially those backed by subprime resale, there can be no lasting economic recov - mortgages with declining ratings—has disrupt - ery, say bailout skeptics. ed credit flows among bank and nonbank Most participants in the bailout policy financial institutions. The convoluted structure debate envision an eventual return to normal - of financial contracts for securitizing and cy—with bank balance sheets restored and insuring mortgage pools makes their valuation credit flows operating at customary levels. The difficult and has contributed to the decline in question is about which policies are appropri - market transactions in these securities. ate to the goal of making the intervening Paulson and Bernanke initially believed recession shorter and shallower. that government purchase of the securities at prices determined through auctions would refuel finance by replacing toxic assets with Recessions: Oil Shocks government cash. However, in the weeks fol - versus Financial Shocks lowing the congressional vote, the bailout evolved into a plan to spend at least $250 bil - Postwar U.S. recessions have usually been lion of the allocated money on purchasing the result of oil shocks combined with restric - preferred stock in banks and other financial tive monetary policies adopted by the Federal companies. That would not eliminate the tox - Reserve to prevent higher energy prices from ic assets from those firms’ books, but it would inducing a broader inflationary spiral. Oil infuse the firms with additional capital in the price spikes require firms and households to hope of reigniting credit transactions and implement structural adjustments: alter pro - restoring the financial sector to normalcy. duction technologies to economize on energy Regardless of the details, government use or shift to cheaper energy sources. Firms efforts to bail out the financial sector have that cannot adapt technologies to conserve met with sharp criticism. There is a strong energy inputs must scale back operations or sentiment among the public that their tax fold. Eventually, new firms emerge in less ener - dollars should not be used to shore up the gy-intensive sectors, especially services. Most health of financial firms that made poor eco - economists agree that in such an environ - nomic decisions. It is difficult to disagree with ment, allowing market price signals to facili - that sentiment. tate needed structural change, rather than 2 361497_PA364_1stClass:361497_PA364_1stClass 3/12/2009 9:08 AM Page 3 Figure 1 World Spot Crude Oil Prices 160 140 120 l e r r a 100 b r e p 80 s r a l l o 60 D 40 20 Now, although 0 oil prices have 2000 2001 2002 2003 2004 2005 2006 2007 2008 pulled back Source: U.S. Energy Information Agency. substantially from peak levels, government-determined resource allocation, substantially from peak levels, the main force the main force is the best approach. propelling economic decline is the continued Although the price of oil has receded in devaluation of the nation’s housing stock. propelling recent months, the trend in oil prices has That decline is sustained by the now-large economic decline been positive so far during this decade inventory of unsold homes and gathering (Figure 1). Oil prices have been creeping momentum in mortgage defaults and home is the continued upward since December 2002 but did not foreclosures. 3 Figure 2 shows the Case-Shiller devaluation of interrupt the post-2003 surge in housing index of home values—a composite index the nation’s prices (Figure 2). The oil price increase was based on home price samples in 20 U.S. continual, however, through 2006—rising major metropolitan areas. It shows that housing stock. from $30 per barrel during late 2003 to home price changes had moderated for a few almost $70 per barrel by mid-2006. That sus - months during the spring of 2002. 4 Had that tained increase in oil prices is associated with moderation been maintained, home prices a declining trend in U.S. non-oil consumer might have remained close to their long-term spending growth and probably caused hous - trend through 2003, as shown in Figure 2. ing price increases to slow during 2006. 2 One reason for the rapid escalation in home After all, most new home construction in prices through 2006, which was far faster than major metropolitan areas was occurring in the long-term trend and happened despite ris - far-flung suburbs, and energy cost increases ing oil prices, was the populist political agenda meant households could no longer commit of promoting home ownership. The genesis of to lifestyles requiring high energy and com - a reinvigorated push for increased homeown - muting costs. The slowdown in home price ership can be dated to President Bill Clinton’s appreciation was tipped into a downturn by support, through the Department of Housing the subsequent, increase in oil prices that and Urban Development, for expanded home - lasted from early 2007 through mid-2008. ownership by first-time, low-income, and Now, although oil prices have pulled back minority homebuyers. Policymakers weakened 3 361497_PA364_1stClass:361497_PA364_1stClass 3/12/2009 9:08 AM Page 4 Figure 2 Composite Case-Shiller Home Price Index 250 Trend through December 2003 Projected Trend 200 CoCmopmopsiotseitCeaCsea-sSeh-Silhleilrler HoomeePPrriicceeIInnddeex x e u l 150 a v x e d n I 100 50 0 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 8 8 8 9 9 9 9 9 9 9 9 9 9 0 0 0 0 0 0 0 0 0 0 1 1 9 9 9 9 9 9 9 9 9 9 9 9 9 0 0 0 0 0 0 0 0 0 0 0 0 1 1 1 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 2 2 Source: Federal Reserve Bank of St. Louis. regulations governing mortgage loan eligibili - menced.
Load more

Recommended publications
  • Causes and Consequences of Recent Bank Failures
    United States Government Accountability Office Report to Congressional Committees GAO January 2013 FINANCIAL INSTITUTIONS Causes and Consequences of Recent Bank Failures GAO-13-71 January 2013 FINANCIAL INSTITUTIONS Causes and Consequences of Recent Bank Failures Highlights of GAO-13-71, a report to congressional committees Why GAO Did This Study What GAO Found Between January 2008 and December Ten states concentrated in the western, midwestern, and southeastern United 2011—a period of economic downturn States—all areas where the housing market had experienced strong growth in in the United States—414 insured the prior decade—experienced 10 or more commercial bank or thrift (bank) U.S. banks failed. Of these, 85 percent failures between 2008 and 2011 (see below). The failures of the smaller banks or 353 had less than $1 billion in (those with less than $1 billion in assets) in these states were largely driven by assets. These small banks often credit losses on commercial real estate (CRE) loans. The failed banks also had specialize in small business lending often pursued aggressive growth strategies using nontraditional, riskier funding and are associated with local sources and exhibited weak underwriting and credit administration practices. The community development and rapid growth of CRE portfolios led to high concentrations that increased the philanthropy. These small bank failures banks’ exposure to the sustained real estate and economic downturn that began have raised questions about the contributing factors in the states with in 2007. GAO’s econometric model revealed that CRE concentrations and the the most failures, including the use of brokered deposits, a funding source carrying higher risk than core possible role of local market conditions deposits, were associated with an increased likelihood of failure for banks across and the application of fair value all states during the period.
    [Show full text]
  • Immaculate Defamation: the Case of the Alton Telegraph
    Texas A&M Law Review Volume 1 Issue 3 2014 Immaculate Defamation: The Case of the Alton Telegraph Alan M. Weinberger Follow this and additional works at: https://scholarship.law.tamu.edu/lawreview Part of the Law Commons Recommended Citation Alan M. Weinberger, Immaculate Defamation: The Case of the Alton Telegraph, 1 Tex. A&M L. Rev. 583 (2014). Available at: https://doi.org/10.37419/LR.V1.I3.4 This Article is brought to you for free and open access by Texas A&M Law Scholarship. It has been accepted for inclusion in Texas A&M Law Review by an authorized editor of Texas A&M Law Scholarship. For more information, please contact [email protected]. IMMACULATE DEFAMATION: THE CASE OF THE ALTON TELEGRAPH By: Alan M. Weinberger* ABSTRACT At the confluence of three major rivers, Madison County, Illinois, was also the intersection of the nation’s struggle for a free press and the right of access to appellate review in the historic case of the Alton Telegraph. The newspaper, which helps perpetuate the memory of Elijah Lovejoy, the first martyr to the cause of a free press, found itself on the losing side of the largest judgment for defamation in U.S. history as a result of a story that was never published in the paper—a case of immaculate defamation. Because it could not afford to post an appeal bond of that magnitude, one of the oldest family-owned newspapers in the country was forced to file for bankruptcy to protect its viability as a going concern.
    [Show full text]
  • Limited Liability Company Operating Agreement INDYMAC
    Execution Copy LIMITED LIABILITY COMPANY OPERATING AGREEMENT INDYMAC VENTURE, LLC 10069513v15 TABLE OF CONTENTS Page ARTICLE I CERTAIN DEFINITIONS ..........................................................................................1 Section 1.01 Definitions ..................................................................................................1 ARTICLE II ORGANIZATION OF THE COMPANY..................................................................2 Section 2.01 Formation....................................................................................................2 Section 2.02 Name...........................................................................................................2 Section 2.03 Organizational Contributions and Actions; Initial Transfer .......................2 Section 2.04 Registered Office; Chief Executive Office.................................................2 Section 2.05 Purpose; Duration.......................................................................................3 Section 2.06 Single Purpose Limitations.........................................................................3 Section 2.07 Limitations on the Company’s Activities ...................................................3 ARTICLE III MANAGEMENT AND OPERATIONS OF THE COMPANY ..............................5 Section 3.01 Management of the Company’s Affairs .....................................................5 Section 3.02 Employees and Services .............................................................................7
    [Show full text]
  • Chairman Bair Et Al., the Adages “Between a Rock and a Hard Place
    From: John P. McBride [mailto:[email protected]] Sent: Thursday, March 05, 2009 12:45 PM To: Comments Subject: RIN 3064-AD35 Chairman Bair et al., The adages “between a rock and a hard place”, “damned if you do, damned if you don’t” seem pretty appropriate to the condition we find ourselves facing in the banking world today. But it is always difficult to find an equitable solution and possibly the “right” solution when the “easy” solution, in this case, is to charge all the banks equally and substantially. After all, its our insurance fund as the FDIC has stated in its release. And I believe most, if not all community bankers would support a risk‐based assessment to the fund. In other words, those that caused this disaster pay more than the thousands of community banks who didn’t take part in the uncontrolled rush to increase earnings, shareholders returns, and expand their presence… In your words, the “systemically important institutions”. I assume you’re speaking of IndyMac, Citigroup, Bank of America etc.. I’m not going to talk about the negative impact at the worst possible time that this assessment will have on our banks earnings. I suspect you will hear that by the thousands as you know already. The insurance fund to provide depositors with a safe haven, which is a pillar of confidence in the banking system, seems to me to be based on two rather important assumptions: 1) There is enough money in the fund to pay those depositors whose money is insured up to the specified limits and 2) There are regulatory experts who are analyzing those institutions who might cause inordinate risk to the fund to protect the depositor and the fund balances.
    [Show full text]
  • 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Wo in the United States District Court for the Distri
    Case 4:13-cv-00589-CKJ Document 54 Filed 09/03/14 Page 1 of 17 1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 Maria Laura Martinez, No. CV-13-00589-TUC-CKJ 10 Plaintiff, ORDER 11 v. 12 Cenlar FSB, 13 Defendant. 14 15 Pending before the Court are two Motions. On March 3, 2014, Defendant filed a 16 Motion for Judgment on the Pleadings. (Doc. 35). Then, on March 14, 2014, Plaintiff 17 filed a Motion for Leave to Amend Complaint. (Doc. 39). 18 The Court reviewed the parties’ pleadings and heard oral argument on August 25, 19 2014. The Court will grant the Motion for Judgment on the Pleadings in part and deny it 20 in part and will grant the Motion for Leave to Amend the Complaint. 21 I. Background1 22 A. Facts 23 Plaintiff purchased a house in Tucson, Arizona on March 7, 2008. (Doc. 11 at ¶7). 24 In the spring of 2010, Plaintiff lost her job and began experiencing financial difficulties. 25 (Id. at ¶8). On August 9, 2010, Plaintiff received a Notice of Trustee Sale. Id. at ¶9. 26 After negotiating with her lender, MeriWest Credit Union, the Trustee Sale was cancelled 27 and her mortgage payments were temporarily reduced. Id. However, one year later in 28 1 Unless otherwise noted, the facts come from the Plaintiff's Complaint. Case 4:13-cv-00589-CKJ Document 54 Filed 09/03/14 Page 2 of 17 1 August 2011, the temporary modification of her mortgage payments expired and her 2 payment was increased.
    [Show full text]
  • A Short History of Financial Deregulation in the United States  I
    A Short History of Financial Deregulation in the United States Matthew Sherman July 2009 Center for Economic and Policy Research 1611 Connecticut Avenue, NW, Suite 400 Washington, D.C. 20009 202-293-5380 www.cepr.net CEPR A Short History of Financial Deregulation in the United States i Contents Timeline of Key Events....................................................................................................................................1 Introduction........................................................................................................................................................3 Background.........................................................................................................................................................3 Usury Laws .........................................................................................................................................................5 Removing Interest Rate Ceilings .....................................................................................................................6 Repealing Glass-Steagall....................................................................................................................................8 Hands-Off Regulation.....................................................................................................................................10 Inflating the Bubble.........................................................................................................................................12
    [Show full text]
  • Tiff, Plain Et Al., Defendant
    Case 1:09-cv-00190-OWW -GSA Document 14 Filed 06/26/09 Page 1 of 3 1 2 3 4 UNITED STATES DISTRICT COURT 5 FOR THE EASTERN DISTRICT OF CALIFORNIA 6 7 1:09-CV-00190 OWW GSA 8 GILBERTO RAMOS, Plaintiff, ORDER CORRECTING FILING TIME OF 9 ORDER RE MOTION TO SUBSTITUTE v. FEDERAL DEPOSIT INSURANCE 10 CORPORATION, AS RECEIVER FOR NDEX WEST, LLC, et al., INDYMAC BANK, F.S.B., AND AS 11 CONSERVATOR FOR INDYMAC FEDERAL 12 Defendant. BANK, FSB, IN THE PLACE OF NAMED DEFENDANT INDYMAC FEDERAL BANK, 13 FSB (DOCS. 3 & 9) 14 Before the court for decision is the Federal Deposit 15 Insurance Corporation’s (“FDIC”) motion to substi tute itself for 16 named defendant IndyMac Federal Bank, FSB. Docs. 3 & 9. At the 17 time the complaint in this case was filed, Plaintiff was 18 represented by Marjan Alitalaei of the law firm of M.W. Roth, 19 PLC. That law firm has ceased operations and the California 20 Superior Court for the County of Los Angeles has assumed 21 jurisdiction over the practice. See Doc. 6. Defendant was 22 instructed to, and did, serve a copy of this motion, along with a 23 notice of the scheduled hearing on June 1, 2009, on Plaintiff via 24 U.S. Mail at Plaintiff’s last known address, 13015 Monarch Palm 25 Avenue, Bakersfield, California, 93314. Doc. 9 (proof of 26 service). Plaintiff has filed no opposition. 27 On July 11, 2008, the Office of Thrift Supervision (“OTS”) 28 1 Case 1:09-cv-00190-OWW -GSA Document 14 Filed 06/26/09 Page 2 of 3 1 closed IndyMac Bank, F.S.B., and appointed an FDIC Receiver as 2 the r eceiver for the failed institution pursuant to 12 U.S.C.
    [Show full text]
  • Overview of the Fdic As Conservator Or Receiver
    September 26, 2008 OVERVIEW OF THE FDIC AS CONSERVATOR OR RECEIVER This memorandum is an overview of the receivership and conservatorship authority of the Federal Deposit Insurance Corporation (the “FDIC”). In view of the many and complex specific issues that may arise in this context, this memorandum is necessarily an overview, but it does give particular reference to counterparty issues that might arise in the case of a relatively large complex bank such as a significant regional bank and outlines elements of the FDIC framework which differ from a corporate bankruptcy. This memorandum has three parts: (1) background on the legal framework governing FDIC resolutions, highlighting changes and developments since the 1990s; (2) an outline of six distinctive aspects of the FDIC approach with comparison to the bankruptcy law provisions; and (3) a final section illustrating issues and uncertainties in the FDIC resolutions process through a more detailed review of two examples – treatment of loan securitizations and participations, and standby letters of credit.1 Relevant additional materials include: the pertinent provisions of the Federal Deposit Insurance (the "FDI") Act2 and FDIC rules3, statements of policy4 and advisory opinions;5 the FDIC Resolution Handbook6 which reflects the FDIC's high level description of the receivership process, including a contrast with the bankruptcy framework; recent speeches of FDIC Chairman 1 While not exhaustive, these discussions are meant to be exemplary of the kind of analysis that is appropriate in analyzing any transaction with a bank counterparty. 2 Esp. Section 11 et seq., http://www.fdic.gov/regulations/laws/rules/1000- 1200.html#1000sec.11 3 Esp.
    [Show full text]
  • The Financial Crisis and Its Impact on the Electric Utility Industry
    The Financial Crisis and Its Impact On the Electric Utility Industry Prepared by: Julie Cannell J.M. Cannell, Inc. Prepared for: Edison Electric Institute February 2009 © 2009 by the Edison Electric Institute (EEI). All rights reserved. Published 2009. Printed in the United States of America. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or any information storage or retrieval system or method, now known or hereinafter invented or adopted, without the express prior written permission of the Edison Electric Institute. Attribution Notice and Disclaimer This work was prepared by J.M. Cannell, Inc. for the Edison Electric Institute (EEI). When used as a reference, attribution to EEI is requested. EEI, any member of EEI, and any person acting on its behalf (a) does not make any warranty, express or implied, with respect to the accuracy, completeness or usefulness of the information, advice or recommendations contained in this work, and (b) does not assume and expressly disclaims any liability with respect to the use of, or for damages resulting from the use of any information, advice or recommendations contained in this work. The views and opinions expressed in this work do not necessarily reflect those of EEI or any member of EEI. This material and its production, reproduction and distribution by EEI does not imply endorsement of the material. Published by: Edison Electric Institute 701 Pennsylvania Avenue, N.W. Washington, D.C. 20004-2696 Phone: 202-508-5000 Web site: www.eei.org The Financial Crisis and Its Impact on the Electric Utility Industry Julie Cannell Julie Cannell is president of J.M.
    [Show full text]
  • Indymac Bancorp, Inc. (NYSE,NDE)
    Indymac Bancorp, Inc. (NYSE,NDE) Indymac Bancorp, lnc. is the holding company for lndymac Bank,@ the largest savings and loan in Los Angeles County and the tenth largest nationwide (based on assets). Through its hybrid thriftimortgage banking business model, Indymac is in the business of designing, manufacturring and distributing cost-efficient financing for the acquisition, development and improvement of single-family homes. Indymac also provides financing secured by single-family homes to facilitate consumers' personal financial goals and strategically invests in single-family mortgage-related assets. Indymac utilizes its award-winning e-MITS technology platform to facilitate automated decisioning, pricing and ratelock of home loans on a nationwide basis via the internet at the point-of-sale. Indymac provides mortgage products and services through various mortgage banking divisions and invests in certain of its mortgage loan production and mortgage servicing for long-term returns. Indymac Bank also offers a wide array of web-enhanced banking services, including deposits, competitive CD and money market accounts, and online bill payment services. Indymac Bank is FDIC insured. With an increased focus on building customer relationships and a valuable consumer franchise, Indymac is committed to becoming a top six mortgage lender in the U.S. by 2010, while maintaining annualized earnings per share growth in excess of 15 percent. The company is dedicated to constantly raising expectations and conducting itself with the highest level of ethics. For more information about Indymac and its affiliates, or to subscribe to the Company's Email Alert feature for notification of Company news and events, please visit our website at www.indymacbank.com.
    [Show full text]
  • The Global Financial Crisis: Analysis and Policy Implications
    The Global Financial Crisis: Analysis and Policy Implications Dick K. Nanto, Coordinator Specialist in Industry and Trade July 2, 2009 Congressional Research Service 7-5700 www.crs.gov RL34742 CRS Report for Congress Prepared for Members and Committees of Congress The Global Financial Crisis: Analysis and Policy Implications Summary The world has entered a global recession that is causing widespread business contraction, increases in unemployment, and shrinking government revenues. Some of the largest and most venerable banks, investment houses, and insurance companies have either declared bankruptcy or have had to be rescued financially. Nearly all industrialized countries and many emerging and developing nations have announced economic stimulus and/or financial sector rescue packages, such as the American Recovery and Reinvestment Act of 2009 (P.L. 111-5). Several countries have resorted to borrowing from the International Monetary Fund as a last resort. The crisis has exposed fundamental weaknesses in financial systems worldwide, demonstrated how interconnected and interdependent economies are today, and has posed vexing policy dilemmas. The process for coping with the crisis by countries across the globe has been manifest in four basic phases. The first has been intervention to contain the contagion and restore confidence in the system. This has required extraordinary measures both in scope, cost, and extent of government reach. The second has been coping with the secondary effects of the crisis, particularly the global recession and flight of capital from countries in emerging markets and elsewhere that have been affected by the crisis. The third phase of this process is to make changes in the financial system to reduce risk and prevent future crises.
    [Show full text]
  • Guaranteed to Fail: Fannie Mae, Freddie Mac and the Debacle
    GUARANTEED TO FAIL Fannie Mae, Freddie MAc and the Debacle of Mortgage Finance V i r a l a c h a r ya M at t h e w r i c h a r d s o n s t i j n V a n n ieuwerburgh l a w r e n c e j . w h i t e Guaranteed to Fail Fannie, Freddie, and the Debacle of Mortgage Finance Forthcoming January 2011, Princeton University Press Authors: Viral V. Acharya, Professor of Finance, NYU Stern School of Business, NBER and CEPR Matthew Richardson, Charles E. Simon Professor of Applied Financial Economics, NYU Stern School of Business and NBER Stijn Van Nieuwerburgh, Associate Professor Finance, NYU Stern School of Business, NBER and CEPR Lawrence J. White, Arthur E. Imperatore Professor of Economics, NYU Stern School of Business To our families and parents - Viral V Acharya, Stijn Van Nieuwerburgh, Matt Richardson, and Lawrence J. White 1 Acknowledgments Many insights presented in this book were developed during the development of two earlier books that the four of us contributed to at NYU-Stern: Restoring Financial Stability: How to Repair a Failed System (Wiley, March 2009); and Regulating Wall Street: The Dodd-Frank Act and the New Architecture of Global Finance (Wiley, October 2010). We owe much to all of our colleagues who contributed to those books, especially those who contributed to the chapters on the government-sponsored enterprises (GSEs): Dwight Jaffee (who was visiting Stern during 2008-09), T. Sabri Oncu (also visiting Stern during 2008-10), and Bob Wright.
    [Show full text]