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Financial crises are recurring phenomena that result in the financial distress of systemically important banks, making it imperative to understand how to best respond to such crises and their consequences. Two policy responses became prominent for dealing with these distressed institutions since the last Global Financial Crisis: bailouts and bail-ins. The main questions surrounding these responses touch everyone: Are bailouts or bail-ins good for the financial system and the real economy? Is it essential to save distressed financial institutions by putting taxpayer money at risk in bailouts, or is it better to use private money in bail-ins instead? Are there better options, such as first lines of defense that help prevent such distress in the first place? Can countercyclical prudential and monetary policies lessen the likelihood and severity of the financial crises that often bring about this distress? Through careful analysis, authors Berger and Roman review and critically assess the extant theoretical and empirical research on many resolution approaches and tools. Placing special emphasis on lessons learned from one of the biggest bailouts of all time, the Troubled Asset Relief Program (TARP), while also reviewing other programs and tools, TARP and Other Bank Bailouts and Bail-Ins around the World sheds light on how best to protect the financial system on Wall Street and the real economy on Main Street.
- Presents a well-informed and rich account of bailouts, bail-ins, and other resolution approaches to resolve financially distressed banks.
- Uses TARP as a key case study of bailouts that has been thoroughly researched.
- Provides valuable research and policy guidance for dealing with future financial crises.
Economics and finance students (upper-division undergraduates / MBA / PhD), bank executives, regulators, policy makers, financial analysts, researchers, and anyone with a basic knowledge of economics / finance interested in banking, financial crises, and regulatory policy
I Introductory materials
1. Introduction to bank bailouts, bail-ins and the related topics covered in the book
2. Conditions that generally bring about bank bailouts, bail-ins, and other resolution methods
3. Descriptions of the TARP program, other bank bailouts and bail-ins, and other resolution approaches in the United States and around the world
4. Theoretical background on bank bailouts, bail-ins, and other resolution approaches
II Empirical research on TARP
5. Methodologies used in most of the TARP empirical studies
6. Determinants of applying for and receiving TARP funds and exiting early from the program
7. Effects of TARP on recipient banks’ valuations
8. Effects of TARP on market discipline
9. Effects of TARP on bank leverage risk
10. Effects of TARP on bank competition
11. Effects of TARP on bank credit supply
12. Effects of TARP on bank portfolio risk
13. Effects of TARP on recipient banks’ credit customers
14. Effects of TARP on the real economy
15. Effects of TARP on systemic risk
III Empirical evidence bank bailouts other than TARP, bail-ins, and other resolution approaches
16. Empirical research on bailouts other than TARP
17. Empirical research on bail-ins
18. Empirical research on other resolution approaches
IV First lines of defense to help avoid bailouts, bail-ins, and other resolutions
19. Mechanisms for the first lines of defense
20. Capital requirements
21. Liquidity requirements
22. Stress tests
23. Prudential regulatory activity restrictions
24. Prudential supervision
25. Deposit insurance
26. Direct government ownership of banks
V Looking toward the future
27. Social costs and benefits
28. Implications for bank policymakers and bank managers
29. Open research questions to be addressed by future research
- No. of pages:
- © Academic Press 2020
- 5th June 2020
- Academic Press
- Paperback ISBN:
- eBook ISBN:
Allen N. Berger is the H. Montague Osteen, Jr., Professor in Banking and Finance in the Finance Department, Darla Moore School of Business, University of South Carolina, since 2008. He is also Ph.D. coordinator of the Finance Department, and Carolina Distinguished Professor of the University. Outside the University, he is currently Vice President of the Financial Intermediation Research Society (FIRS), and will be its 2021 Conference Coordinator, and 2022 Program Chair and President. He is also Senior Fellow at the Wharton Financial Institutions Center and Fellow of the European Banking Center, and serves on the editorial boards of eight professional finance and economics journals. Professor Berger was editor of the Journal of Money, Credit, and Banking from 1994-2001, has co-edited seven special issues of various professional journals, and has co-organized a number of professional research conferences. He also co-edited all three editions of the Oxford Handbook of Banking, 2010, 2015, and 2019. His research covers a variety of topics related to financial institutions. He is co-author of Bank Liquidity Creation and Financial Crises (2016, Elsevier), as well as TARP and other Bank Bailouts and Bail-Ins around the World: Connecting Wall Street, Main Street, and the Financial System (2020, Elsevier). He has published over 150 professional articles, including well over 100 in refereed journals. These include papers in top finance journals, Journal of Finance, Journal of Financial Economics, Review of Financial Studies, Journal of Financial and Quantitative Analysis, Review of Finance, Journal of Financial Intermediation and Journal of Corporate Finance; top economics journals, Journal of Political Economy, American Economic Review, Review of Economics and Statistics, and Journal of Monetary Economics; and other top professional business journals, Management Science, Journal of Business, and European Journal of Operational Research. His research has been cited over 80,000 times according to Google Scholar, including 27 different articles with over 1,000 citations. He has given invited keynote addresses on five continents, and has been a visiting scholar at several Federal Reserve Banks and central banks of other nations. Professor Berger received the University of South Carolina Educational Foundation Award for Research in Professional Schools for 2018, and was named Professor of the Year for 2015-2016 by the Darla Moore School of Business Doctoral Students Association. He also has won a number of best paper awards from different journals and finance conferences. He was Secretary/Treasurer, Financial Intermediation Research Society (FIRS) from 2008-2016; and Senior Economist from 1989 to 2008 and Economist from 1982-1989 at the Board of Governors of the Federal Reserve System. He received a Ph.D. in Economics from the University of California, Berkeley in 1983, and a B.A. in Economics from Northwestern University in 1976.
Moore School of Business, University of South Carolina, Columbia, SC, USA
Raluca A. Roman is a Senior Economist at the Federal Reserve Bank of Philadelphia since July 2018. From 2015-2018, she was a Research Economist at Federal Reserve Bank of Kansas City. She holds a Ph.D. in Finance from University of South Carolina; an M.B.A. with a concentration in Finance from University of Bridgeport, and a B.A. in Economics from Alexandru Ioan Cuza University (Romania). Dr. Roman’s research interests include topics related to banking and financial institutions (including bank government bailouts and bail-ins, bank stress tests, internationalization, and corporate governance), consumer finance (including retail credit, consumer behavior, and consumer market trends), corporate finance, and international finance. She has published three articles in the Journal of Financial and Quantitative Analysis, one in Management Science, two in the Journal of Financial Intermediation, one in Journal of Money, Credit, and Banking, one in Financial Management, one in Journal of Corporate Finance, one in Journal of Banking and Finance, one book chapter in the “Handbook of Finance and Development” and one book chapter in the “Oxford Handbook of Banking,” and has received four awards for her papers at conferences. She is co-authoring the book “TARP and other Bank Bailouts and Bail-Ins around the World: Connecting Wall Street, Main Street, and the Financial System” (2020, Elsevier). Her research has been presented and she has discussed the research of others at numerous finance and regulatory conferences. She has more than seven years of professional experience in banking and corporate finance, and has worked for top international organizations like UBS Investment Bank and MasterCard International, where she won various awards.
Raluca A. Roman, Federal Reserve Bank of Philadelphia, Philadelphia, PA, USA
It is now over twelve years since the global financial crisis and a rich panoply of financial sector rescue measures being unleashed to arrest the Great Recession. Several parts of the global economy have not yet fully recovered or found the right policy mix to restore growth on a sustainable basis while maintaining financial stability. This book by Allen Berger and Raluca Roman provides a timely taxonomy and assessment of these rescue measures, organizing them around a conceptual framework as well as parsing systematically through the growing body of empirical evidence on their efficacy. I recommend it highly to all academics, policy makers and practitioners.
Viral V. Acharya, C.V.Starr Professor of Economics, Department of Finance, New York University Stern School of Business
The financial distress of systemically important banks that typically accompany financial crises often results in recessions and other significant damages to the real economy, making policy responses of first-order importance. This book provides a comprehensive, research-based analysis and review of bank bailouts, bail-ins, and other resolution approaches to deal with the financial distress and avoid the economic damages. The authors of the book, Allen Berger and Raluca Roman, have written a significant body of relevant research, and are ideally positioned to provide this analysis and review. The authors provide an enlightening discussion of the benefits and costs of a number of resolution approaches for systemically important banks in financial distress, including bailouts and bail-ins. They also cover first lines of defense and countercyclical policies to prevent such distress in the first place. The book is an indispensable guide for researchers, policymakers, bank managers, analysts, and students.
Manju Puri, J.B. Fuqua Professor of Finance, Department of Finance, Duke University Fuqua School of Business
The global financial crisis caused policy interventions at a level and of an intensity not seen before during our lifetimes, in particular in the area of banking stability. However, more than ten years later we are still lacking the essential holistic overview and in-depth analysis of the dramatic bank bailouts and bail-ins that took place around the world, including in the US. Well here it is. By a team of top scholars who not only have produced most of the relevant academic research on this topic, but also have the necessary insiders` eye for the deep trade-offs involved and for the minutiae of the actual policymaking that took place: A book that undoubtedly will withstand time and become the classic source to turn to when pondering bank bailouts/–ins in the near or distant future.
Steven Ongena, Professor of Banking in the Department of Banking and Finance at the University of Zurich, Senior chair at the Swiss Finance Institute, Research Professor at KU Leuven, and Research Fellow in Financial Economics of CEPR.
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