Connectedness and Contagion: Protecting the Financial System by Hal S. Scott PDF

By Hal S. Scott

ISBN-10: 0262034379

ISBN-13: 9780262034371

The Dodd--Frank Act of 2010 was once meant to reform monetary rules to be able to hinder one other substantial concern reminiscent of the monetary meltdown of 2008. Dodd--Frank is essentially premised at the prognosis that connectedness was once the key challenge in that obstacle -- that's, that monetary associations have been overexposed to each other, leading to a potential chain response of mess ups. during this ebook, Hal Scott argues that it isn't connectedness yet contagion that's the most vital portion of systemic probability dealing with the economy. Contagion is an indiscriminate run by means of temporary collectors of economic associations which may render in a different way solvent associations bancrupt. It poses a significant chance simply because, as Scott explains, our economy nonetheless is determined by nearly $7.4 to $8.2 trillion of runnable and uninsured non permanent liabilities, 60 percentage of that are held through nonbanks. Scott argues that efforts through the Federal Reserve, the FDIC, and the Treasury to forestall the contagion that exploded after the financial ruin of Lehman Brothers lessened the commercial harm. And but Congress, spurred by way of the public's aversion to bailouts, has dramatically weakened the facility of the govt. to answer contagion, together with boundaries at the Fed's powers as a lender of final hotel. delivering uniquely distinctive forensic analyses of the Lehman Brothers and AIG disasters, and suggesting replacement regulatory techniques, Scott makes the case that we have to repair and advance our guns for struggling with contagion.

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Connectedness and Contagion: Protecting the Financial System from Panics (MIT Press) by Hal S. Scott

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