Clark Center Forum

Takeo Hoshi and Anil K Kashyap NBER Working Paper Series  ** updated version ** The U.S. government is using a variety of tools to try to rehabilitate the U.S. banking industry. The two principal policy levers discussed so far are employing asset managers to buy toxic real estate securities and making bank equity purchases. Japan […] 

Oliver Hart and Luigi Zingales December 3, 2008 This year will be remembered not just for one of the worst financial crises in American history, but also as the moment when economists abandoned their principles. There used to be a consensus that selective intervention in the economy was bad. In the last 12 months this […] 

Joshua Rauh and Luigi Zingales November 19, 2008 Not long ago, Alitalia was one of the largest airlines in the world. Today it is a shadow of its former self, having burned massive amounts of money. The culprit was the Italian government, which continued providing subsidized financing to the money-losing airline, delaying the necessary restructuring. […] 

November 6, 2008 The central problem in fostering global economic dialogue is that it is currently a dialogue between the deaf. Industrial countries stopped requiring financing long ago, believe they are responsible global citizens, and guard their policy independence carefully. It seems they view the primary role of multilateral institutions as correcting the policy mistakes […] 

November 06, 2008 In today’s Slate, Ray Fisman of Columbia Business School writes “What’s In It for Me?: How congressmen decided to vote for the bailout.” Read article> For a detailed analysis of the bailout, see a new working paper by Atif Mian, Amir Sufi, and Francesco Trebbi of the Chicago GSB. Read more> 

Pietro Veronesi and Luigi Zingales November 3, 2008 We calculate the efficiency and distributional effects of the largest ever U.S. Government intervention in the financial system. Possible systemic effects aside, we estimate that the revised Paulson plan increased the value of banks’ financial claims by $133 billion at a taxpayers’ cost of $112 -135 billions, […] 

Economist’s Voice – October 2008 Luigi Zingales offers an alternative to Paulson’s bailout plan. He seeks to combat the credit crisis on two fronts: the real estate market and Wall Street. Read more> 

The message? Highly leveraged institutions gambling heavily on risky, low-transparency securities are simply asking for trouble. To avoid future financial crises, subprime mortgages need to move to moderately leveraged institutions – pension plans, 401(k) plans, mutual funds, sovereign funds, endowments, insurance companies and investment vehicles with conservative balance sheets like Berkshire Hathaway. Investment banks, and […] 

Federal Reserve Bank of Chicago At this writing in early October, 2008 it appears that the first phase of the financial crisis is ending and the second is about to or has begun. The phase that is ending entails flushing the worst assets created during the sub-prime lending boom out of the financial system. It […] 

October 16, 2008 Steven Kaplan provides a primer on the crisis. What is the problem? How did we get here? What do we need to do? What does the bailout do and not do? What else should be done? View PDF>