Capital Shortfall: A New Approach to Ranking and Regulating Systemic Risks

摘要

The most severe impacts of the financial crisis of 2007-2009 arose immediately after the fail ure of Lehman Brothers on September 15, 2008. It is natural to wonder whether the United States should have arranged for an orderly rescue of Lehman as it did for Fannie Mae and Freddie Mac the week before and as it did for AIG, Merrill Lynch, Citigroup, Bank of America, Morgan Stanley, Goldman Sachs, Washington Mutual, and Wachovia as well as many smaller and foreign banks over the next days and weeks. How much capital would have been necessary ex post to arrange such an orderly rescue? Another policy recommendation of the Dodd-Frank Act of 2010 is to facilitate orderly liquidation and/ or resolution and require living wills of finan cial institutions so that no future bailouts will be necessary. Will this work when we need it? There is, however, also a third choice.