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Missing elements in US financial reform: A Kübler-Ross interpretation of the inadequacy of the Dodd-Frank Act

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  • Kane, Edward J.

Abstract

The success of any treatment plan depends on how completely the problems it targets have been diagnosed. The precrisis bubble in securitization can be traced to incentive conflict that allows national safety nets to subsidize leveraged risk-taking. Safety-net subsidies encouraged regulation-induced innovations that enabled firms to take hard-to-monitor risks and to make themselves politically, administratively, and economically difficult for government officials to fail and unwind.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 36 (2012)
Issue (Month): 3 ()
Pages: 654-661

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Handle: RePEc:eee:jbfina:v:36:y:2012:i:3:p:654-661

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Web page: http://www.elsevier.com/locate/jbf

Related research

Keywords: Dodd-Frank Act; Financial reform; Safety-net subsidies; Financial crises; Regulatory capture;

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References

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  1. Dean Baker & Travis McArthur, 2009. "The Value of the “Too Big to Fail” Big Bank Subsidy," CEPR Reports and Issue Briefs 2009-36, Center for Economic and Policy Research (CEPR).
  2. Edward Kane, 2010. "Redefining and Containing Systemic Risk," Atlantic Economic Journal, International Atlantic Economic Society, vol. 38(3), pages 251-264, September.
  3. Santiago Carbo-Valverde & Edward J. Kane & Francisco Rodriquez-Fernandez, 2011. "Safety-net benefits conferred on difficulty-to-fail-and-unwind banks in the U.S. and EU before and during the Great Recession," Proceedings 1132, Federal Reserve Bank of Chicago.
  4. Gropp, Reint & Moerman, Gerard, 2004. "Measurement of contagion in banks' equity prices," Journal of International Money and Finance, Elsevier, vol. 23(3), pages 405-459, April.
  5. Robert Jarrow, 2007. "A Critique of Revised Basel II," Journal of Financial Services Research, Springer, vol. 32(1), pages 1-16, October.
  6. Xin Huang & Hao Zhou & Haibin Zhu, 2009. "A Framework for Assessing the Systemic Risk of Major Financial Institutions," BIS Working Papers 281, Bank for International Settlements.
  7. Luigi Zingales & Oliver Hart, 2009. "A New Capital Regulation For Large Financial Institutions," Working Papers 2009.124, Fondazione Eni Enrico Mattei.
  8. Merton, Robert C, 1978. "On the Cost of Deposit Insurance When There Are Surveillance Costs," The Journal of Business, University of Chicago Press, vol. 51(3), pages 439-52, July.
  9. Ronn, Ehud I & Verma, Avinash K, 1986. " Pricing Risk-Adjusted Deposit Insurance: An Option-Based Model," Journal of Finance, American Finance Association, vol. 41(4), pages 871-95, September.
  10. Gorton, Gary B., 2010. "Slapped by the Invisible Hand: The Panic of 2007," OUP Catalogue, Oxford University Press, number 9780199734153.
  11. Duan, Jin-Chuan & Moreau, Arthur F. & Sealey, C. W., 1992. "Fixed-rate deposit insurance and risk-shifting behavior at commercial banks," Journal of Banking & Finance, Elsevier, vol. 16(4), pages 715-742, August.
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Cited by:
  1. Cabral, Ricardo, 2013. "A perspective on the symptoms and causes of the financial crisis," Journal of Banking & Finance, Elsevier, vol. 37(1), pages 103-117.

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