2023 Banking Turmoil

Big Banks Must Become Globally Resolvable—or Significantly “Smaller”

The subsidized emergency takeover of Credit Suisse by UBS brings the current global "too big to fail" regime into question. This column argues that an in-depth analysis of the global resolution framework by both regulators and academics is needed. The main question is whether a resolution of a global systemically important bank is indeed feasible in plausible scenarios. An affirmation would clearly be the best possible result of this analysis. However, if such a resolution proves not to be realistic, then there should be no hesitation to drastically reduce the global risks of such institutions via regulation of their business models.

Defer Bank Management’s Compensation for Times of Crisis

Adopting a deferred pay scheme for bank managers would provide them with needed funding during a downturn and would incentivize more conservativism when it comes to risk-taking.

Gambling for Resurrection: How U.S. Banks Hedged Interest Rate Risk During 2022 Monetary Tightening

Following a widely cited report on unrecognized bank losses due to interest rate rises, Amit Seru and his co-authors have taken a...

Resolving the Banking Crisis

Following up their recent analysis of risk in the banking system, DeMarzo, Jiang, Krishnamurthy, Matvos, Piskorski and Seru argue that banks should...

How To Really Fix Banking

Laurence Kotlikoff and Rick Miller argue that banking as we know it is dying. It’s time to arrange a smooth transition to...

Changing Accounting Rules for Banks can Incentivize Better Risk Mitigation

Accounting procedures for held-to-maturity assets in banks allows them to avoid taking losses. Research from professors Bischof, Laux, and Leuz shows how...

Destabilizing Digital “Bank Walks”

Bank regulators have always assumed that bank deposits are ‘sticky,’ but the advent of digital banking is changing that. New research focuses...

A Directorship at a Federal Reserve Bank is Good News for Banks, but May be Bad News for the Fed

Far before the collapse of SVB, I provided systematic evidence that banks appear to benefit from their directorships on Federal Reserve Banks....

The Fed and Bank Failures

Viral Acharya and Raghuram Rajan explain how quantitative easing contributed to the problems underlying the recent bank failures such as that of...

Letters that Matter: How Interest Groups Shape Financial Legislation

Members of Congress are inundated with an avalanche of correspondence on a daily basis. But what persuades them to heed the call?...

LATEST NEWS

A World With Far Fewer Mergers

Brooke Fox and Walter Frick analyze research and ideas presented at the Stigler Center Antitrust and Competition Conference that question the value of mergers.

The Banking Risks of Central Bank Digital Currencies

The implementation of central bank digital currencies as the primary medium of exchange would exacerbate the flaws of our current fiat system which encourage banks to overextend credit and create liabilities that they cannot redeem. This will worsen the already recurring cycles of financial crises, writes Vibhu Vikramaditya.

The Whig History of the Merger Guidelines

A pervasive "Whig" view of United States antitrust history among scholars and practitioners celebrates the Merger Guidelines' implementation of increasingly sophisticated economic methods since their...

Algorithmic Collusion in the Housing Market

While the development of artificial intelligence has led to efficient business strategies, such as dynamic pricing, this new technology is vulnerable to collusion and consumer harm when companies share the same software through a central platform. Gabriele Bortolotti highlights the importance of antitrust enforcement in this domain for the second article in our series, using as a case study the RealPage class action lawsuit in the Seattle housing market.

The Future Markets Model Explains Meta/Within: A Reply to Herb Hovenkamp

In response to both Herb Hovenkamp’s February 27 article in ProMarket and, perhaps more importantly, also to Hovenkamp’s highly regarded treatise, Lawrence B. Landman, first, shows that the Future Markets Model explains the court’s decision in Meta/Within. Since Meta was not even trying to make a future product, the court correctly found that Meta would not enter the Future Market. Second, the Future Markets Model is the analytical tool which Hovenkamp says the enforcers lack when they try to protect competition to innovate.