Banking Crises

The history of banking crises provides an informative perspective on the current financial crisis.

Another "Deregulation" Myth

The current financial crisis was not caused by Republican deregulation, despite media reports to the contrary.

Most Pundits Are Wrong about the Bubble

Deregulation is not to blame for the financial crisis.

Another "Deregulation" Myth

A cautionary tale about financial rules that failed.

How to Prevent Foreclosures

How much should the government do to prevent home foreclosures and how should we do it?

The Subprime Turmoil

The American financial system, if it remains true to its history, will adapt and innovate its way back to profitability and high stock prices sooner than is suggested bycurrent dire predictions.

The Last Trillion-Dollar Commitment

The government takeover of Fannie and Freddie was necessary because of their massive losses on more than $1 trillion of subprime and Alt-A investments.

Blame Fannie Mae and Congress for the Credit Mess

Without government encouragement, banks would never have offered such dodgy loans.

Resistance Is Futile

It is not progress to move toward a one-size-fits-all financial system based entirely on behemoth universal depository banks.

The Foreclosure-House Price Nexus

Home prices are quite sticky, andfears of a major fall in house prices, with all of its attendant negative macroeconomic consequences, typically are not warranted even in extreme foreclosure circumstances.

Housing Collapse Ahead?

Most Americans have not experienced any significant decline in the value of their homes, nor are they likely to.

Preserving Slave Families for Profit

Data from the New Orleans slave market reveal large price discounts for families that cannot be explained by scale effects, child care costs, legal restrictions, or transport costs.

The Regulatory Record of the Greenspan Fed

The Fed's role in banking regulation, orfinancial regulation, is not well understood.

Not (Yet) a 'Minsky Moment'

Despite recent economic disruptions, there is still little reason to believe a full-on recession will result.

A Raw Deal

Amity Shlaes' The Forgotten Man is useful in understanding the Great Depression, New Deal, and serious policy errors of the time.

Reconsidering the Great Depression

Reclaim Power from the Ratings Agencies

Are ratings agencies to blame for the current mortgage crisis?

Is the IMF Obsolete?

AEI scholars debate the relevance of the International Monetary Fund.

Activity-Based Valuation of Bank Holding Companies

Predictable future variation in returns does not reflect priced risk factors, but is related to trading costs.

Expensing Employee Stock Options

It is clear that there is no legitimate basis for the proposed expensing of employee stock options.

Monopoly-Creating Bank Consolidation?

The merger of Fleet and BankBoston in September 1999 resulted in a regional New England lending market in which only one large, universal bank remained.

Banker Fees and Acquisition Premia for Targets in Cash Tender Offers

Charles W. Calomiris and Donna M. Hitscherich analyze data on fees paid to investment bankers and acquisition premia paid for targets in cash tender offers.

Venture Capital as Human Resource Management

Venture capitalists add value to portfolio firms by obtaining and transferring information about senior managers across firms over time.

Resolving the Puzzle of the Underissuance of National Bank Notes

The puzzle of underissuance of national bank notes disappears when one disaggregates data, takes account of regulatory limits, and considers differences in opportunity costs.

Resolving the Puzzle of the Underissuance of National Bank Notes

The puzzle of underissuance of national bank notes disappears when one disaggregates data, takes account of regulatory limits, and considers differences in opportunity costs.

Options Pricing and Accounting Practice

The establishment of new accounting rules for expensing options would likely do more harm than good.

Lessons from Argentina and Brazil

Consequences of Bank Distress during the Great Depression

How to Restructure Failed Banking Systems

The costs of government assistance to banks depend on the way rescues are managed.

Europe and Globalization

Europe's history demonstrates that looking outward--not inward--is the key reason why Europe took the lead from medieval times on.

The Board Game

Board members should not discipline management and protect shareholders' investments when we have a system that prevents boards from having the incentive to do so.

There Are No Good Arguments against Tax Cuts

Fears of a "double dip" recession are overblown, but the market's got a long way to go before it returns to pre-Sept. 11 levels.

Banking Approaches the Modern Era

Bankingregulatory impediments exist: the distinction between finance and commerce, the moral hazard created by deposit insurance, and the status of government-sponsored enterprises.

How to Break the Impasse in Development Aid

In the war on terrorism, President George W. Bush prefers alliances but is willing to act alone.

Marginal Tax Rate Cuts and the Public Tax Debate

This paper exploresthe effect of changing tax revenues and deficits on interest rates and the effect of changing revenues on government spending.

A Globalist Manifesto for Public Policy

Searching for Sense in the Tax Cut Debate

The long-term tax cuts under consideration in Congress will result in moderate deficit increases, and moderate increases have little or no effect on interest rates.

The Fastest, Fairest Way out of the Argentine Debt Crisis

Argentina's attempt to swap debt for lower-interest bonds is an admission that its current balance sheet is unsustainable; had this been acknowledged a year ago, much misery might have been averted.

Homeownership That's Too Important to Risk

Loans that have been labeled predatory reveal the dark side of subprime lending.

What to Do, and What Not to Do, about "Predatory Lending"

For the most part, predatory lending practices can be addressed by focusing efforts on better enforcing laws against fraud, improving disclosure rules, offering government-financed counseling, and placing a few well thought out limits on credit industry practices.

Subordinated Debt Issuance by Fannie, Freddie Falls Short

The subordinated debt issued by Fannie Mae and Freddie Macis notcredibly unprotected and of sufficient size.

How to Resolve the Argentine Sovereign Debt Crisis

An Argentine bailout by the United States would boost prices today and in the future, and result in greater creditor resistance to a future write down.

Argentina Can't Pay What It Owes

Further postponement of an Argentinedebt restructuring is likely to increase the damage both locally and in other markets.

How New is the "New IMF"?

Causes of U.S. Bank Distress during the Depression

This paper provides the first comprehensive econometric analysis of the causes of bank distress during the Depression.

Can Emerging Market Bank Regulators Establish Credible Discipline?

Argentina's bank regulatory system now is widely regarded as one of the two or three most successful among emerging market economies.

Give Credit Where It Is Due

The Meltzer Commission makesrecommendations for reform of the International Monetary Fund, the World Bank, and the regional development banks.

The IMF Needs More Than a New Boss

Appointing a successor to Michel Camdessus as managing director of the International Monetary Fund promises to be a global opera bouffe.

The McCain Tax Plan

Three AEI economists debate the merits of Senator John McCain's (R-Ariz.) tax reform proposals.

The McCain Tax Plan

Three AEI economists debate the merits of Senator JohnMcCain's (Ariz.)tax reform proposals.

Lessons from the Tequila Crisis for Successful Financial Liberalization

The “Tequila Crisis," which originated in Mexico and spread to Brazil and Argentina, is one of the most significant events in emerging financial markets during the past two decades.

Building an Incentive-Compatible Safety Net

Constructing and managing a proper “bank safety net”--a set of policies designed to protect banks from adverse shocks--presents the government with a unique set of challenges.

A Welcome to Foreign Banks Could Energize Mexico

Further allegations arose that a couple of now-defunct Mexican banks had illegally financed Mexico’s ruling Institutional Revolutionary Party in the 1994 presidential campaign.

Fixing the IMF

The future role of the International Monetary Fund is today in doubt.

How to Invent a New IMF

Although many commentators discuss the need to reform the International Monetary Fund, few have offered detailed proposals to achieve that purpose.

How to Invent a New IMF

The Impending Collapse of the European Monetary Union

Reductions in transactions and hedging costs from currency homogeneity within Europe could increase European wealth and income.

Runs on Banks and the Lessons of the Great Depression

Banking instability and regulation in the United States suggests the need to reevaluate views of the inherent instability of banking systems and the value of deposit insurance.

Blueprints for a New Global Financial Architecture

This paper considers current problems in what is often termed the "global financial architecture" and proposes a set of solutions to those problems.

High Loan-to-Value Mortgages

The growth ofhigh loan-to-valuelending in the consumer marketis causing the product to be viewed under a harsher light both by those inside and outside the financial services industry.

Wanted: Market Discipline in Deposit Insurance

Concerns that expanding bank powers might unwittingly increase the safety net “subsidy” must be addressed, and market discipline is the way to do it.

The IMF's Moral Hazard

FutureInternational Monetary Fundpolicy must takethe issue of moral hazardseriously.

Revitalizing Ailing Banks

The IMF's Imprudent Role as Lender of Last Resort

The responses by the IMF and the U.S. government to the Mexican crisis of 1994 to 1995 and the recent Asian crises are examples of dangerous short-sightedness.

Harmful Bailouts

The practice of bailing out banks has encouraged financial structures that keep profits private while losses are borne by the public.

Contagion and Bank Failures During the Great Depression

Mortgage Reform

Was the Great Depression a Watershed for American Monetary Policy?

The Great Depression changed the institutions governing monetary policy.

Financing the American Corporation

The history of institutional change and financial innovation in the United States has been attempts to work around costly restrictions on relationships not faced by corporations in most other countries.

The Efficiency of Self-Regulated Payment Systems

This paper analyzes the operation of the Suffolk System, an interbank note-clearing network operating throughout New England from the 1820s through the 1850s.

Historical Macroeconomic and American Macroeconomic History

This essay reviews American macroeconomic history to illustrate its potential uses, and to draw out methodological implications.

Contagion and Bank Failures during the Great Depression

This paper uses individual bank data to address the question of whether solvent Chicago banks failed during the panic as the result of confusion by depositors.

Commercial Paper, Corporate Finance, and the Business Cycle

Little is known about the characteristics or behavior of individual commercial paper issuers, or about the reasons for the countercyclical issuance of commercial paper in the aggregate.

Leverage as a State Variable for Employment, Inventory Accumulation, and Fixed Investment

This paper examines whether the responsiveness of employment, investment, and inventory accumulation to exogenous changes in sales depend on the leverage of the firm.

Is the Discount Window Necessary?

This paper argues that the primary role of the discount window should be to provide occasional, temporary support to particular financial markets during localized financial crises.

Corporate-Finance Benefits from Universal Banking

Limitations on bank consolidation and branching in the United States at an early date effectively limited the scope of commercial banks and their involvement in financing large-scale industry.

Internal Finance and Investment

The sensitivity of investment spending to internal funds for firms with high marginal surtax rates appears mainly to reflect information-related capital-market frictions.

Greenback Resumption and Silver Risk

This paper begins by developing a framework for price and interest rate determination under suspension of convertibility during the national banking period.

Firm Heterogeneity, Internal Finance, and Credit Rationing

Assessing the extent to which agents or firms face capital-market imperfections and quantity restrictions on credit is crucial for measuring the cost of capital for investment.

International Adjustment under the Classic Gold Standard

Recent studies of the classical gold standard have revived interest in the process by which macroeconomic shocks were transmitted internationally during the pre-World War I period.

Growing in Debt

U.S. farms, and with them agricultural lending institutions, are currently experiencing their most severe stress since the 1930s.

Price Flexibility, Credit Rationing, and Economic Fluctuations

The reawakening of interest in links between price flexibility and fluctuations in economic activity calls for a reconsideration of models of price and quantity adjustment.