TARP and Other Bank Bailouts and Bail-Ins around the World - 1st Edition - ISBN: 9780128138649

TARP and Other Bank Bailouts and Bail-Ins around the World

1st Edition

Connecting Wall Street, Main Street, and the Financial System

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Authors: Allen Berger Raluca Roman
Paperback ISBN: 9780128138649
Imprint: Academic Press
Published Date: 1st June 2020
Page Count: 300
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Description

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.

Key Features

  • Employing research from over 500 references, the book presents a well- informed and rich account of bailouts, bail-ins, and other resolution approaches to resolve financially distressed banks, as well as first lines of defense and countercyclical policies to lessen the likelihood and severity of such distress in the future.
  • Uses TARP as a key case study of bailouts, but also discusses other bailouts, bail-ins, and related policies in the U.S. and around the world.
  • Illuminates the short-run and long-run costs and benefits of the many approaches to dealing with the financial distress of large financial institutions.

 

Readership

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

Table of Contents

Part I. Introductory Materials
1. Introduction to Bank Bailouts in General and the Troubled Asset Relief Program (TARP) in Specific
2. Descriptions of the TARP Program and Other Selected Bank Bailouts
3.Theoretical Background on the Determinants of Entry and Exit of Bank Bailouts
4.Theoretical Background on the Effects of Bank Bailouts

Part II. Empirical Evidence on the Determinants and Effects of TARP and other Bailouts
5. Determinants of TARP Capital Injections
6. Determinants of TARP Exit Decisions
7. The Effects of TARP on Recipient Banks’ Valuation
8. Effects of TARP on Bank Market Share and Market Power
9. Effects of TARP on Market Discipline
10. The Effects of TARP on Recipient Banks’ Supplies of Credit
11. Effects of TARP on Real Economic Conditions
12. Effects of TARP on Bank Capital Decisions
13. Effects of TARP on Banks’ Risk-Taking
14. Effects of TARP on Systemic Risk
15. Effects of TARP on Bank Corporate Governance
16. Effects of TARP on Politically Connected Banks’ Performance and Credit Supply
17. Other Effects of TARP on Recipient Banks’ Loan Customers
18. Effects of other Bailouts in the U.S. and other Nations

Part III. Looking Toward the Future
19. What Are the Important Open Research Questions about the Effects of TARP and other Bailouts?
20. Weighing the Social Costs and Benefits of TARP and other Bailouts

Details

No. of pages:
300
Language:
English
Copyright:
© Academic Press 2020
Published:
1st June 2020
Imprint:
Academic Press
Paperback ISBN:
9780128138649

About the Author

Allen Berger

Allen Berger

Allen N. Berger is the H. Montague Osteen, Jr., Professor in Banking and Finance and Ph.D. coordinator of the Finance Department, Moore School of Business, and Carolina Distinguished Professor, University of South Carolina; Senior Fellow, Wharton Financial Institutions Center; Fellow, European Banking Center; and Secretary/Treasurer, Financial Intermediation Research Society. He also currently serves on the editorial boards of six professional finance journals. In addition, Professor Berger is past editor of the Journal of Money, Credit, and Banking and has co-edited six special issues of various professional journals and both editions of the Oxford Handbook of Banking. His research covers a variety of topics related to financial institutions. He is co-author of Bank Liquidity Creation and Financial Crises (Elsevier). He has published over 100 professional articles in refereed journals, including papers in top finance journals, Journal of Finance, Journal of Financial Economics, Review of Financial Studies, and Journal of Financial and Quantitative Analysis; top economics journals, Journal of Political Economy, American Economic Review, and Journal of Monetary Economics; and other top professional business journals, Managerial Science and Journal of Business; and over 30 other non-refereed publications. Professor Berger was 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.

Affiliations and Expertise

Moore School of Business, University of South Carolina, Columbia, SC, USA

Raluca Roman

Raluca A. Roman is an economist at the Federal Reserve Bank of Philadelpha. She joined the Fed in June 2015, following the completion of her Ph.D. in Finance at University of South Carolina. Raluca also holds an M.B.A. with concentration in Finance from University of Bridgeport, and a B.A. in Economics from Alexandru Ioan Cuza University (Romania). Raluca's research areas include a variety of topics related to banking and financial institutions (including bank government bailouts, internationalization, and corporate governance) and corporate finance. She has presented her research and discussed the research of others at various regulatory and finance conferences, is a co-author of two articles in the Journal of Financial and Quantitative Analysis and one in Management Science and has received three awards for her papers at conferences. She also has over 7 years of professional experience in banking and corporate finance and worked for top international organizations like UBS Investment Bank and MasterCard International, where she won various awards.

Affiliations and Expertise

Raluca A. Roman, Federal Reserve Bank of Philadelphia, Philadelphia, PA, USA

Reviews

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 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.

 

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, Fuqua School of Business

Ratings and Reviews