Found 21 article(s) for author 'Hal Scott'

Connectedness and Contagion: Protecting the Financial System from Panics

Connectedness and Contagion: Protecting the Financial System from Panics. Hal Scott, May 2016, Book. “The Dodd–Frank Act of 2010 was intended to reform financial policies in order to prevent another massive crisis such as the financial meltdown of 2008. Dodd–Frank is largely premised on the diagnosis that connectedness was the major problem in that crisis—that is, that financial institutions were overexposed to one another, resulting in a possible chain reaction of failures. In this book, Hal Scott argues that it is not connectedness but contagion that is the most significant element of systemic risk facing the financial system. Contagion is an indiscriminate run by short-term creditors of financial institutions that can render otherwise solvent institutions insolvent. It poses a serious risk because, as Scott explains, our financial system still depends on approximately $7.4 to $8.2 trillion of runnable and uninsured short-term liabilities, 60 percent of which are held by nonbanks.Link

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The Federal Reserve: The Weakest Lender of Last Resort Among Its Peers

The Federal Reserve: The Weakest Lender of Last Resort Among Its Peers. Hal Scott, November 25, 2015, Paper. “This article for the first time compares the Federal Reserve’s powers as lender of last resort (‘LLR’) and its ability to fight contagion, with its three major peers, the Bank of England (the ‘BOE’), the European Central Bank (the ‘ECB’) and the Bank of Japan (the ‘BOJ’). It concludes that the Federal Reserve (the ‘Fed’) is currently the weakest of the four, largely due to a hostile political environment for LLR powers, which are equated with bailouts, and restrictions placed by the 2010 Dodd–Frank Act on the Fed’s ability to loan to non-banks, whose role in the financial system is ever-increasing. This is a concern for the global as well as the US financial system, given the economic importance of the United States and the use of the dollar as a reserve currency …Link

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The Next Stock Market Shutdown Could Be Much Worse

The Next Stock Market Shutdown Could Be Much Worse. Hal Scott, August 16, 2015, Opinion. “The three-hour shutdown of the New York Stock Exchange last month made headlines world-wide. Despite the brief calamity, investors emerged largely unharmed, because the technical glitch was with the NYSE’s trading platform. The outcome would have been very different had the problem been with the exchange’s consolidated public market data feed—the live feed that lets traders and investors see public bid and ask prices, the price and time of the last trade, and other crucial information…Link

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A Financial System Still Dangerously Vulnerable to a Panic

A Financial System Still Dangerously Vulnerable to a Panic, Hal Scott, March 1, 2015, Opinion. “Dodd-Frank restrictions on the Federal Reserve’s powers to act as lender-of-last-resort, coupled with restrictions on federal guarantees for bank deposits and money-market funds, pose a threat to U.S. and global financial stability. The heart of the 2008 crisis was a panic following the bankruptcy of Lehman Brothers…” May require purchase or user account. Link

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Capital Market Regulation

Capital Market Regulation. Robert Glauber, Hal Scott, 2015, Syllabus. “Examination of the structure, competitiveness and social utility of U.S. capital markets as the basis for considering the range of proposals for financial regulatory reform growing out of the recent world-wide financial crisis. Specific topics will likely include: mechanisms for controlling risk in financial institutions, particularly capital and liquidity requirements; the unique problem of systemic risk; dealing with illiquid and insolvent institutions, including resolution authority; optimal regulatory structure; reform of securitization; regulation of derivatives trading; consumer protection…” Link

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Extracting with Purpose Creating Shared Value in the Oil and Gas and Mining Sectors’ Companies and Communities

Extracting with Purpose: Creating Shared Value in the Oil and Gas and Mining Sectors’ Companies and Communities, Shared Value Initiative, Hal A. Scott, October 2014, Paper, Oil and gas and mining companies operate in some of the most underdeveloped regions on earth. Many of the countries and communities in which they operate face significant challenges in health, education, economic development, and basic infrastructure. Meanwhile, the extractives sectors present an opportunity for social change on a massive scale: Five of the world’s twenty biggest companies operate in these sectors. While the social imperative is clear, so is the business imperative to improve interactions with host communities: companies lose billions each year to community strife. Link

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The Mystery of ‘Living Will’ Rules for Banks

The Mystery of ‘Living Will’ Rules for Banks. Hal Scott, September 3, 2014, Opinion. “Most college students now returning to campuses will never hear the words that the Federal Reserve and the Federal Deposit Insurance Corp. spoke in August to the managements of the country’s 11 largest banks: You’ve failed. Each of these big banks flunked the course titled “living wills.” The Fed and the FDIC required the banks to make contingency plans detailing how in a crisis they would be wound down without suspending critical financial services, and without public support. The two regulators announced jointly…” Link

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Bank Capital for Operational Risk: A Tale of Fragility and Instability

Bank Capital for Operational Risk: A Tale of Fragility and Instability. Hal Scott, February 10, 2014, Paper. “Operational risk is fundamentally different from all other risks taken on by a bank. It is embedded in every activity and product of an institution, and in contrast to the conventional financial risks (e.g. market, credit) is harder to measure and model, and not straight forwardly eliminated through simple adjustments like selling off a position. Operational risk tends to be about 9-13% of the total risk pie, though growing rapidly since the 2008-09 crisis…” Link verified June 19, 2014

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Dodd-Frank’s panic problem

Dodd-Frank’s panic problem. Hal Scott. August 5, 2013. Opinion. “Last week, writing in POLITICO, former members of Congress Chris Dodd and Barney Frank touted the fact that the legislation that bears their names now forbids using public funding to keep failing banks in business. “The U.S. federal government now has the power to terminate the lives of large, heavily indebted financial institutions,” they boasted. Ironically, however, Dodd-Frank has made it more likely that the taxpayers will need to rescue firms, because their statute has left us less able to fight contagion…” Link verified June 19, 2014

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Stamping Nonbanks ‘SIFI’ Is Harmful and Needless

Stamping Nonbanks ‘SIFI’ Is Harmful and Needless. Hal Scott, February 14, 2013, Opinion. “The Financial Stability Oversight Council is about to decide which nonbanks with assets of $50 billion or more to designate as systemically important. It should use this authority extremely sparingly because it is based on the flawed premise of connectedness. The Lehman Brothers failure is instructive. Lehman’s bankruptcy did not set off a chain reaction of failures of connected financial firms (those with direct exposure to one another). What it did set off was a contagious run on a wide spectrum of financial firms…” Link

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