A Year of Living Dangerously: The Management of the Financial Crisis in 2008
AbstractThere are many reasons to regret the decision of U.S. financial authorities to insert the government into the resolution of the investment bank Bear Stearns in March 2008. The Federal Reserve's use of its discount window built up false hope of future rescues. Paying off the uninsured creditors of Bear Stearns overcompensated them at the time and invited speculative attacks on the equity of similarly situated firms. I will argue that the market seizure after Lehman Brothers' decision to seek the protection of bankruptcy was an echo of the prior official decision to protect Bear Stearns.
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Bibliographic InfoArticle provided by American Economic Association in its journal Journal of Economic Perspectives.
Volume (Year): 25 (2011)
Issue (Month): 1 (Winter)
Find related papers by JEL classification:
- E23 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Production
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- G01 - Financial Economics - - General - - - Financial Crises
- G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
- G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
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