Studies

Financial Crises and Regulatory Responses

Professor

 

Tano Santos (Columbia University)

Dates

 

10-14 September 2018

Hours

 

15:30 to 19:00

Intended for

 

Researchers, practitioners, and graduate students interested in financial economics.

Prerequisites

 

First-year graduate microeconomics.

Overview

 

Financial crises are recurrent. There have been more than a dozen major financial crises in the world since the 1980s. Each of them has been preceded by a credit boom. Why do risk accumulates beyond what is reasonable? Do risks accumulate because of some endogenous leverage cycle a la Minsky or are they due to the interaction between a static regulatory framework and a dynamic process of innovation and new risk creation?  What are the challenges that policymakers face in preventing said accumulation? In general, what is the political economy of credit booms?   Did policymakers have the tools to do so in the most recent crisis? When crises come the regulatory response is typically strong.  In particular, the response to the financial crisis of 2008 has been both broad and deep on both sides of the Atlantic (Dodd-Frank in the USA and the Bank Recovery and Resolution Directive in the EU) and brings echoes of similar efforts in the past (for instance in the US after the Great Depression, with Glass-Steagall and the creation of the FDIC). Why do we need a new regulatory overhaul after each financial crisis? Does regulation (and enforcement) depreciate with time? What is the political economy of financial regulatory reform?

The course uses the recent crisis as a lens to learn about the recurrence of financial crises, the predictable regulatory response and tries to assess the new tools in the context of financial crises coming from potentially new quarters. It combines formal microeconomic models that have been produced in the last few years to understand (the most recent) financial crises.

Topics

 

Risk accumulation in the recent crisis
Crisis and policy response
Why is it so difficult? Assessing the response
What remains: Governance, safe harbors and other things

 

Tano Santos is the David L. and Elsie M. Dodd Professor of Finance at Columbia Business School. He received his Ph. D. in Economics from the University of Chicago. He is a member of the Financial Advisory Roundtable of the Federal Reserve Bank of New York. His work has appeared in leading journals such as the Quarterly Journal of Economics, American Economic Review, Journal of Political Economy, Review of Financial Studies, Journal of Finance, Journal of Financial Economics and the Journal of Public Economics.

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