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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.

Suggested Citation

  • Kane, Edward J., 2012. "Missing elements in US financial reform: A Kübler-Ross interpretation of the inadequacy of the Dodd-Frank Act," Journal of Banking & Finance, Elsevier, vol. 36(3), pages 654-661.
  • Handle: RePEc:eee:jbfina:v:36:y:2012:i:3:p:654-661 DOI: 10.1016/j.jbankfin.2011.05.020
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    References listed on IDEAS

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    1. 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.
    2. Carbó-Valverde, Santiago & Kane, Edward J. & Rodriguez-Fernandez, Francisco, 2013. "Safety-net benefits conferred on difficult-to-fail-and-unwind banks in the US and EU before and during the great recession," Journal of Banking & Finance, Elsevier, vol. 37(6), pages 1845-1859.
    3. Edward Kane, 2010. "Redefining and Containing Systemic Risk," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 38(3), pages 251-264, September.
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    6. Gorton, Gary B., 2010. "Slapped by the Invisible Hand: The Panic of 2007," OUP Catalogue, Oxford University Press, number 9780199734153.
    7. 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).
    8. 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.
    9. Oliver Hart & Luigi Zingales, 2011. "A New Capital Regulation for Large Financial Institutions," American Law and Economics Review, Oxford University Press, vol. 13(2), pages 453-490.
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    Cited by:

    1. Aigbe Akhigbe & Anna D. Martin & Ann Marie Whyte, 2016. "Dodd–Frank and risk in the financial services industry," Review of Quantitative Finance and Accounting, Springer, vol. 47(2), pages 395-415, August.
    2. Lambert, Thomas, 2015. "Lobbying on Regulatory Enforcement Actions: Evidence from Banking," HIT-REFINED Working Paper Series 28, Institute of Economic Research, Hitotsubashi University.
    3. 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.
    4. Leledakis, George N. & Pyrgiotakis, Emmanouil G., 2016. "U.S. bank M&As in the post-Dodd-Frank Act era: Do they create value?," MPRA Paper 73290, University Library of Munich, Germany.
    5. Wald Nowotny, 2013. "The Economics of Financial Regulation," Chapters,in: Stability of the Financial System, chapter 15 Edward Elgar Publishing.
    6. repec:kap:jbuset:v:144:y:2017:i:3:d:10.1007_s10551-015-2798-7 is not listed on IDEAS

    More about this item

    Keywords

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

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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