In the U.S., as in most countries with well-developed securities markets, derivative securities enjoy special protections under insolvency resolution laws. Most creditors are quot;stayedquot; from enforcing their rights while a firm is in bankruptcy. However, many derivatives contracts are...

Macroeconomic and banking stability are inexorably linked. This paper examines the nature of this linkage and makes recommendations for enhancing macroeconomic stability by improving bank stability. Except where governments intervene significantly, bank instability is caused primarily by macro...

quot;Too big to failquot; is one of the most frequently used but misunderstood terms in banking in the U.S. Except for a brief period in the mid-1980s after the insolvency of the large Continental Illinois National Bank caught the bank regulators unprepared and they did not fail the bank but...

Recent evidence suggests that bank regulators appear to be able to resolve insolvent large banks efficiently without either protecting uninsured deposits through invoking quot;too-big-to-failquot; or causing serious harm to other banks or financial markets. But resolving swap positions at...

Bank failures are widely feared for a number of reasons, including concern that depositors may suffer both losses in the value of their deposits (credit losses) and, possibly more importantly, restrictions in access to their deposits (liquidity losses). In the United States, this is not true for...

Following the costly banking and thrift crises of the 1980's and early '90s, the United States dramatically reformed the federal government safety net for depository institutions, which many blamed for the outbreak and high cost of the crises. The reforms, highlighted by the 1991 Federal Deposit...

Banking reform has always been a part of the political agenda, although policy tends to focus on the specific concerns of the public at the time of crisis; as times (and crises) change, so does the direction of public policy. The result has often been that change instituted in answer to one...

Losses may accrue to depositors at insolvent banks both at and after the time of official resolution. Losses at resolution occur because of poor closure rules and regulatory forbearance. Losses after resolution occur if depositors' access to their claims is delayed or frozen. While the sources...

Much concern has recently been expressed that both large, procyclical changes in bank assets and quot;credit crunchesquot; caused by banks' reluctance to expand loans during recessions contribute to economic instability. These effects are difficult to explain using the standard textbook model of...

In this article we examine whether the federal safety net is viewed by the market as being extended beyond de-jure deposits to other bank debt and even the debt of bank holding companies (BHCs). We extend previous research by focusing on the post-FDICIA period and by also examining the...