The “shadow” banking system played a major role in the financial crisis, but was not a central focus of the recent Dodd-Frank Law and thus remains largely unregulated. This paper proposes principles for the regulation of shadow banking and describes a specific proposal to implement those...

Safe assets are demanded to smooth consumption across states (both intertemporally and in cross-section). Some of these assets are supplied publicly (government bonds) and some are created and supplied privately (such as mortgagebacked securities and asset-backed securities). Private assets are...

A financial crisis is an event in which the holders of short-term debt come to question the collateral backing that debt. So, the resiliency of the financial system depends on the quality of that collateral. We show that there is a shortage of high-quality collateral by examining the convenience...

The financial architecture prior to the recent financial crisis was a system of mobile collateral. Safe debt, whether government bonds or privately-produced bonds, i.e., asset-backed securities, could be traded, posted as collateral, and rehypothecated, moving to its highest value use. Since the...

Credit Booms are not rare; some end in a crisis (bad booms) while others do not (good booms). We document that credit booms start with an increase in productivity growth, which subsequently falls faster during bad booms. We develop a model in which crises happen when credit booms change to an...

Safe assets are demanded to smooth consumption across states (both intertemporallyand in cross-section). Some of these assets are supplied publicly (governmentbonds) and some are created and supplied privately (such as mortgage-backedsecurities and asset-backed securities). Private assets are...

In the last forty or so years the U.S. financial system has morphed from a mostly insured retail deposit-based system into a system with significant amounts of wholesale short-term debt that relies on collateral, and in particular Treasuries, which have a convenience yield. In the new economy...

In the last forty or so years the U.S. financial system has morphed from a mostly insured retail deposit-based system into a system with significant amounts of wholesale short-term debt that relies on collateral, and in particular Treasuries, which have a convenience yield. In the new economy...

The pre-crisis financial architecture was a system of mobile collateral. Safe debt, whether government bonds or privately produced bonds, ie asset-backed securities, could be traded, posted as collateral, and rehypothecated, moving to its highest value use. Since the financial crisis, regulatory...

Safe assets play a critical role in an(y) economy. A “safe asset” is an asset that is (almost always) valued at face value without expensive and prolonged analysis. That is, by design there is no benefit to producing (private) information about its value. And this is common knowledge....