Sky Blog
When the COVID-19 pandemic shuttered major economies in March 2020, it also wreaked havoc on financial markets. In the first few weeks of March, investment-grade corporate bonds lost roughly a fifth of their value, on par with the declines in …
Yesterday, the Federal Reserve announced the results of its annual stress tests. This was the first time since 2009 that the Fed had stress tested large banks during a period of systemic distress. In a new paper, Stress Testing During …
Small business assistance has been a central focus of the government’s response to the COVID-19 crisis, and for good reason. Small businesses underlie the vitality of our neighborhoods, spark innovation, and employ almost one-half of the U.S. workforce. In a …
The rapid spread of Covid-19 and massive change in behavior required to curb it have transformed the trajectory of the world’s economy. Just a few short weeks ago, the United States was basking in the longest period of sustained economic …
The greatest single-day decline in the stock market this century, widespread fear and uncertainty, shuttered schools, an end to large gatherings everywhere from NBA games to the South by Southwest festival – these are just a few of the signs …
Modern finance is fast moving, extremely complex, and contributes to pervasive unknowns. Yet the processes governing how finance is regulated are typically slow, highly deliberative, and often reflect deeply ingrained and incredibly optimistic assumptions about our ability to understand the …
More than a decade has passed since the worst of the 2007-2009 financial crisis. In that time, we have learned that some of the gravest consequences of the crisis were not the economic fallout, but the political backlash it triggered. …
In their lively disagreement about the role of deregulation in contributing to the 2007-2009 financial crisis, professors Arthur Wilmarth and Paul Mahoney inadvertently illuminate why the processes through which finance is regulated are so ill-suited to that purpose. Finance is …
As we approach the 10-year anniversary of the failure of Lehman Brothers, the news is again awash in a debate about whether policymakers could have saved the investment bank. That the issue remains so deeply contested reflects how fundamentally flawed …
Over the last half century, finance has made remarkable progress explaining the pricing of financial assets. In relying on portfolio theory, however, mainstream pricing models tend to ignore investor preferences for certain asset types. This is a mistake. In a …
In a world of “alternative facts” and political rhetoric crafted to mislead, it is easy to forget that idealized visions can at times illuminate more than they obfuscate. In a book review recently published in Harvard Law Review and available …
There are two established explanations for bank runs: coordination problems among depositors and information asymmetries between bank managers and depositors. In a new paper, “Information Gaps and Shadow Banking,” forthcoming in the Virginia Law Review and available here, I …
On Monday, LendingClub Corp., a leader in the growing online lending space, announced the surprise resignation of its founder and CEO, Renaud Laplanche. Laplanche resigned in response to a board investigation that revealed a number of internal control failures, including …
As reflected in the title of the new memoir by Former Federal Reserve Chairman Ben Bernanke, The Courage to Act: A Memoir of a Crisis and Its Aftermath, Bernanke clearly believes that he and other Fed policymakers demonstrated exceptional …
Bagehot, as in Walter Bagehot, was mentioned no less than seven times in the decision splitting the baby in the AIG trial.[1] A nineteenth century British commentator, Bagehot was among the first to recognize that too little liquidity could …
“There is an old saw that the Fed chair is the second most powerful person in government. In the aftermath of the financial crisis, that may actually be an understatement.” Nicholas Lemann, The New Yorker:
America has a long …
Why haven’t the significant financial and technological innovations of the past thirty years substantially decreased the cost of financial intermediation? What explains the ever-increasing complexity of financial products and markets? Why do so many investors hold actively managed mutual funds …
With the stock market regularly surpassing record highs, housing prices surging 13.6 percent in 2013 alone, and unemployment down to 6.7 percent, it is easy to forget just how dire the economic outlook appeared just five years ago. It is …
It is well known that the Fed injected massive amounts of liquidity into the financial system during the 2007-2009 financial crisis. Far less well known is that the Fed was not the only place banks obtained government-backed liquidity when market …