Found 44 article(s) for author 'Jeremy Stein'

Monetary Policy as Financial-Stability Regulation

Monetary Policy as Financial-Stability Regulation. Jeremy Stein, March 2011, Paper. “This paper develops a model that speaks to the goals and methods of financial-stability policies. There are three main points. First, from a normative perspective, the model defines the fundamental market failure to be addressed, namely that unregulated private money creation can lead to an externality in which intermediaries issue too much short-term debt and leave the system excessively vulnerable to costly financial crises. Second, it shows how in a simple economy where commercial banks are the only lenders, conventional monetary-policy…” Link

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A Macroprudential Approach to Financial Regulation

A Macroprudential Approach to Financial Regulation. Jeremy Stein, Samuel Hanson, Winter 2011, Paper. “Many observers have argued that the regulatory framework in place prior to the global financial crisis was deficient because it was largely “microprudential” in nature. A microprudential approach is one in which regulation is partial equilibrium in its conception and aimed at preventing the costly failure of individual financial institutions. By contrast, a “macroprudential” approach recognizes the importance of general equilibrium effects, and seeks to safeguard the financial system as a whole. In the aftermath of the…” Link

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Securitization, Shadow Banking, and Financial Fragility

Securitization, Shadow Banking, and Financial Fragility. Jeremy Stein, September 24, 2010, Paper. “I describe how the market works: how pools of loans (for example, mortgages or credit-card and auto loans) are packaged and structured into ABS and how investors such as hedge funds, pension funds, and broker-dealer firms finance the acquisition of these ABS. […] I outline the economic forces that drive securitization; these include both an efficiency-enhancing element of risk-sharing and a less desirable element of banks trying to circumvent regulatory capital requirements.” Link

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Basel Needs a Firm Hand and Fewer Delays

Basel Needs a Firm Hand and Fewer Delays. Jeremy Stein, David Scharfstein, September 13, 2010, Op-Ed. “This weekend top central bankers announced agreement on Basel III, the new rules to enhance global capital standards for banks. The agreement, which will now be presented to the Group of 20 leading nations summit in Seoul this November, represents a significant and welcome increase in the capital that banks will be required to hold. However, worries that a rapid transition will cut lending and deepen the global recession mean the full increase will be delayed until 2019. These transitional…” (May require user account or purchase) Link

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The Squam Lake Report: Fixing the Financial System

The Squam Lake Report: Fixing the Financial System. John Campbell, Jeremy Stein, 2010, Book. “In the fall of 2008, fifteen of the world’s leading economists–representing the broadest spectrum of economic opinion–gathered at New Hampshire’s Squam Lake. Their goal: the mapping of a long-term plan for financial regulation reform. The Squam Lake Report distills the wealth of insights from the ongoing collaboration that began at these meetings and provides a revelatory, unified, and coherent voice for fixing our troubled and damaged financial markets. As an alternative to the patchwork...” (May require user account or purchase) Link

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Presidential Address: Sophisticated Investors and Market Efficiency

Presidential Address: Sophisticated Investors and Market Efficiency. Jeremy Stein, August 2009, Paper. “Stock-market trading is increasingly dominated by sophisticated professionals, as opposed to individual investors. Will this trend ultimately lead to greater market efficiency? I consider two complicating factors. The first is crowding–the fact that, for a wide range of “unanchored” strategies, an arbitrageur cannot know how many of his peers are simultaneously entering the same trade. The second is leverage–when an arbitrageur chooses a privately optimal leverage ratio, he may create a fire-sale externality…” Link

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This Bailout Doesn’t Pay Dividends

This Bailout Doesn’t Pay Dividends. Jeremy Stein, David Scharfstein, October 21, 2008, Article. “On Oct. 13, the chief executives of nine large American banks were called to a meeting at the Treasury Department. At the meeting, Secretary Henry Paulson offered them $125 billion from the federal government in exchange for shares of preferred stock. The chief executives accepted his terms. In some accounts of the meeting, Secretary Paulson is described as playing the role of the Godfather, making the banks an offer they could not refuse. But in one important respect, he was more Santa Claus than…” (May require user account or purchase) Link

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The $700 Billion Question

The $700 Billion Question. Jeremy Stein, September 23, 2008, Op-Ed. “Henry Paulson, the Treasury secretary, has opened the government checkbook and is poised to spend $700 billion to end the financial crisis. What comes next depends on the precise mission and operating powers he and Congress assign the new Treasury agency that will oversee the bailout. We see four broad possibilities. First, the agency could act as a deep-pocketed private investor that sees a bargain-buying opportunity – Warren Buffet on steroids. This strategy makes sense if one believes that the crises has caused the prices…” (May require user account or purchase) Link

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Academic Freedom, Private-Sector Focus, and the Process of Innovation

Academic Freedom, Private-Sector Focus, and the Process of Innovation. Jeremy Stein, Philippe Aghion, September 16, 2008, Paper. “We develop a model that clarifies the respective advantages and disadvantages of academic and private-sector research. Rather than relying on lack of appropriability or spillovers to generate a rationale for academic research, we emphasize control-rights considerations, and argue that the fundamental tradeoff between academia and the private sector is one of creative control versus focus. By serving as a precommitment mechanism that allows scientists to freely pursue their own interests…” Link

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A Gap-Filling Theory of Corporate Debt Maturity Choice

A Gap-Filling Theory of Corporate Debt Maturity Choice. Jeremy Stein, Robin Greenwood, Samuel Hanson, June 2008, Paper. “We argue that time-series variation in the maturity of aggregate corporate debt issues arises because firms behave as macro liquidity providers, absorbing the large supply shocks associated with changes in the maturity structure of government debt. We document that when the government funds itself with relatively more short-term debt, firms fill the resulting gap by issuing more long-term debt, and vice-versa. This type of liquidity provision is undertaken more aggressively: i) in periods when the ratio…” Link

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