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What is How Big Banks Fail: and What to Do About It about?

A leading finance expert explains how and why big banks fail—and what can be done to prevent itDealer banks—that is, large banks that deal in securities and derivatives, such as J. P. Morgan and Goldman Sachs—are of a size and complexity that sharply distinguish them from typical commercial banks. When they fail, as we saw in the global financial crisis, they pose significant risks to our financial system and the world economy. How Big Banks Fail and What to Do about It examines how these banks collapse and how we can prevent the need to bail them out.In sharp, clinical detail, Darrell Duffie walks readers step-by-step through the mechanics of large-bank failures. He identifies where the cracks first appear when a dealer bank is weakened by severe trading losses, and demonstrates how the bank's relationships with its customers and business partners abruptly change when its solvency is threatened. As others seek to reduce their exposure to the dealer bank, the bank is forced to signal its strength by using up its slim stock of remaining liquid capital. Duffie shows how the key mechanisms in a dealer bank's collapse—such as Lehman Brothers'failure in 2008—derive from special institut

Author

Darrell Duffie

Publisher

Princeton, N.J.: Princeton University Press

Published

2011

Language

EN

ISBN

9780691148854

Subjects

Finance, Business, Economics