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Case studies on disruptions during the crisis

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Abstract

The 2007-09 financial crisis saw many funding mechanisms challenged by a drastic reduction in market liquidity, a sharp increase in the cost of transactions, and, in some cases, a drying-up in financing. This article presents case studies of several key financial markets and intermediaries under significant distress at this time. For each case, the author discusses the size and evolution of the funding mechanism, the sources of the disruptions, and the policy responses aimed at mitigating distress and making markets more liquid. The review serves as a reference on the vulnerabilities of funding structures and is useful for those considering the scope and design of reform efforts.

Suggested Citation

  • Yorulmazer, Tanju, 2014. "Case studies on disruptions during the crisis," Economic Policy Review, Federal Reserve Bank of New York, issue Feb, pages 17-28.
  • Handle: RePEc:fip:fednep:00006
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    References listed on IDEAS

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    1. Michael J. Fleming, 2012. "Federal Reserve Liquidity Provision during the Financial Crisis of 2007–2009," Annual Review of Financial Economics, Annual Reviews, vol. 4(1), pages 161-177, October.
    2. Paul Goldsmith-Pinkham & Tanju Yorulmazer, 2010. "Liquidity, Bank Runs, and Bailouts: Spillover Effects During the Northern Rock Episode," Journal of Financial Services Research, Springer;Western Finance Association, vol. 37(2), pages 83-98, June.
    3. Marco Cipriani & Antoine Martin & Bruno Parigi, 2013. "Money market funds intermediation, bank instability, and contagion," Staff Reports 599, Federal Reserve Bank of New York.
    4. Gorton, Gary & Metrick, Andrew, 2012. "Securitized banking and the run on repo," Journal of Financial Economics, Elsevier, vol. 104(3), pages 425-451.
    5. Adam Copeland & Antoine Martin & Michael Walker, 2010. "The tri-party repo market before the 2010 reforms," Staff Reports 477, Federal Reserve Bank of New York.
    6. Michael J. Fleming & Warren B. Hrung & Frank M. Keane, 2009. "The Term Securities Lending Facility: origin, design, and effects," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 15(Feb).
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    Cited by:

    1. Huberto Ennis & Todd Keister, 2016. "Optimal banking contracts and financial fragility," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 61(2), pages 335-363, February.
    2. Bogataj, D. & Aver, B. & Bogataj, M., 2016. "Supply chain risk at simultaneous robust perturbations," International Journal of Production Economics, Elsevier, vol. 181(PA), pages 68-78.

    More about this item

    Keywords

    Wholesale funding; Money market mutual funds; Commercial paper; Repo; Dollar swap lines; Asset-backed commercial paper;

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G19 - Financial Economics - - General Financial Markets - - - Other
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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