How big banks fail and what to do about it

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how big banks fail and what to do about it

Darrell Duffie (Author of How Big Banks Fail and What to Do about It)

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Published 09.12.2018

Dimon: Let the big dumb banks fail

‘Too Good to Fail’: Big Ideas for a Big Bank with Values

Dealer banks--that is, large banks that deal in securities and derivatives, such as J. 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.

Financial Markets and Portfolio Management. Darrel Duffie, Dean Witter Distinguished Professor of Finance at the Graduate School of Business, Stanford University, is one of the leading scholars in financial economics and has written numerous brilliant research articles and books on financial markets and institutions. How big banks fail and what to do about it is no exception as it neatly explains the key underlying mechanisms that can cause large financial institutions to fail. The main theme of the book is that short-term repo funding, prime brokerage, and OTC derivatives are prone to runs similar to classic bank runs on demand deposits. Therefore, these contracts entail significant systemic risk, as became obvious during the — financial crisis.

People are distrustful of big banks, perhaps today more than ever before. Amalgamated Bank has a year history of building a bank to serve the needs of workers. The bank also worked with European institutions to pioneer remittance products that allowed immigrant garment workers in the U. Learn more about this growing movement of people using business as a force for good, and sign up to receive the B the Change Weekly newsletter for more stories like this one, delivered straight to your inbox once a week. Amalgamated has broadened its focus over time, but its insistence upon positive impact has been unshakeable. A member of the Global Alliance for Banking on Values , New Resource was founded with the mission to use money as an catalyst of positive change, with an early emphasis on sustainability.

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Dealer banks--that is, large banks that deal in securities and derivatives, such as J. 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.

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