Systemically Important or "Too Big to Fail" Financial Institutions

Marc LaBonte

ISBN 10: 150868698X / ISBN 13: 9781508686989

Published by Createspace Independent Publishing Platform, 2015

About this Item

This item is printed on demand. New copy - Usually dispatched within 5-9 working days.

Seller Inventory # C9781508686989

Bibliographic Details

• Title: Systemically Important or "Too Big to Fail" Financial Institutions
• Publisher: Createspace Independent Publishing Platform
• Publication Date: 2015
• Language: English
• ISBN 10: 150868698X
• ISBN 13: 9781508686989
• Binding: Paperback / softback
• Condition: New
• Weight: 172 grams

About this title

Synopsis

Although “too big to fail” (TBTF) has been a perennial policy issue, it was highlighted by the near-collapse of several large financial firms in 2008. Financial firms are said to be TBTF when policy makers judge that their failure would cause unacceptable disruptions to the overall financial system, and they can be TBTF because of their size or interconnectedness. In addition to fairness issues, economic theory suggests that expectations that a firm will not be allowed to fail create moral hazard—if the creditors and counterparties of a TBTF firm believe that the government will protect them from losses, they have less incentive to monitor the firm’s riskiness because they are shielded from the negative consequences of those risks. If so, they could have a funding advantage compared with other banks, which some call an implicit subsidy. S.Con.Res. 8, passed by the Senate on March 22, 2013, and H.Con.Res. 25, as amended and passed by the Senate on October 16, 2013, create a non-binding budget reserve fund that allows for future legislation to address the TBTF funding advantage.