Deregulation and financial consolidation have led to the development of financial holding companies—allowing commercial banking, insurance, investment banking, and other financial activities to be conducted under the same corporate umbrella—and the Federal Reserve has been named supervisor...

Financial crises remain a recurring problem despite, or perhaps, as some suggest, because of, extensive innovation in capital markets over the past several decades. Crisis interventions are fraught with trade-offs: What are the costs of doing nothing? What is the probability that markets will...

The guaranteed lending programs of the Small Business Administration (SBA) are large and growing rapidly. The SBA’s fiscal year 2008 performance budget calls for $25 billion in guaranteed loans for small businesses—a new record for the agency. Some critics of SBA programs suggest they do not...

One of the most important issues in the regulatory reform debate is that of systemically important financial institutions. This paper proposes a framework for identifying and supervising such institutions; the framework is designed to remove the advantages they derive from becoming systemically...

Systemic banking crises can have devastating effects on the economies of developing or industrialized countries. This Policy Discussion Paper reviews the factors that weaken banking systems and make them more susceptible to crises.

This Policy Discussion Paper summarizes the papers that were presented at the Liquidity in Frictional Markets conference in November 2008. The papers, which looked at markets for assets as diverse as houses, bank loans, and electronic funds transfer, all explored that amorphous concept called...

This Policy Discussion Paper reviews the restructuring and recapitalization of Long-Term Capital Management, looking at possible alternatives and paying particular attention to the Federal Reserve’s role.

“Toxic waste” refers to the riskiest derivative structures arising from collateralized mortgage obligations (CMOs). We use simulations to predict how this risk would manifest itself in various interest rate environments. We also look for evidence on the total dollar value of these...