Fairly Recently: Must- and Should-Reads, and Writings... (December 11, 2018)

Lend freely at a penalty rate on collateral that is good in normal times: David Warsh: What Have We Learned Since Bagehot?: "Fighting Financial Crises: Learning from the Past... by Gary Gorton and Ellis Tallman... offer five 'guiding principles' for dealing with financial crises in the future. Find the short-term debt.... Suppress bank-specific information... emergency lending facilities.... Prevent systemically important institutions from failing.... And consider that certain laws and regulations need not be applied during a financial crisis...

...All of these were applied in 2008, though seldom masterfully.  It took more than two weeks for the Treasury Department to come up with a plan to render opaque the condition of the banking system overall–by forcing healthy banks to accept emergency TARP loans along with the weak. Secrecy had been no part of Bagehot’s playbook, perhaps because discretion was so deeply embedded in British banking traditions as to be taken for granted.  Regulators had to find a way to reinvent a practices that had been a standard part of the clearing house playbook. With illustration, analysis, and nuance on every page, Fighting Financial Crises is one hundred and fifty years better than Lombard Street...


#shouldread #finance #centralbanking #monetarypolicy #financialcrises

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