The paper elicits a mechanism by which private leverage choices exhibit strategic complementarities through the reaction of monetary policy. When everyone engages in maturity transformation, authorities have little choice but facilitating refinancing. In turn, refusing to adopt a risky balance...

The global economy has a chronic shortage of safe assets which lies behind many recent macroeconomic imbalances. This paper provides a simple model of the Safe Asset Mechanism (SAM), its recessionary safety traps, and its policy antidotes. Safety traps share many common features with...

This paper examines macroprudential policies in open emerging economies. It discusses how the recent financial crisis has provided a rationale for macroprudential policies to help manage the economy and the need for policymakers to monitor the financial cycle and systemic risks. It also...

We develop a model of the market for federal funds that explicitly accounts for its two distinctive features: banks have to search for a suitable counterparty, and once they meet, both parties negotiate the size of the loan and the repayment. The theory is used to answer a number of positive and...

The U.S. Federal Reserve used the Term Auction Facility (TAF) to provide term funding to eligible depository institutions from December 2007 to March 2010. According to the Fed, the purpose of TAF was to inject term funds through a broader range of counterparties and against a broader range of...

This paper provides an empirical analysis of the risk of trading revenues of U.S. commercial banks. We collect quarterly data on trading revenues, broken down by business line, as well as the Value at Risk-based market risk charge. The overall picture from these preliminary results is that there...

We analyze data on fees paid to investment bankers and acquisition premia paid for targets in cash tender offers. Our results are broadly consistent with the predictions of a benign view of the role of investment banks in advising acquisition targets. Fees to investment banks are correlated with...

A conflict of interest exists when a party to a transaction could potentially make a gain from taking actions that are detrimental to the other party in the transaction. This paper examines the economics of conflicts of interest in financial institutions and reviews the growing empirical...

This paper identifies factors that influence decisions about a country's financial safety net, using a comprehensive dataset covering 180 countries during the 1960-2003 period. Our analysis focuses on how private interest-group pressures, outside influences, and political-institutional factors...

The Terrorism Risk Insurance Act of 2002 (TRIA) established a public-private program to cover commercial enterprises against foreign terrorism on US soil. It was a temporary measure to increase the availability of risk coverage for terrorist acts by requiring insurers to provide coverage....