Financial crises are recurring phenomena that result in the financial distress of systemically important banks, making it imperative to understand how to best respond to such crises and their consequences. Two policy responses became prominent for dealing with these distressed institutions since the last Global Financial Crisis: bailouts and bail-ins. The main questions surrounding these responses touch everyone: Are bailouts or bail-ins good for the financial system and the real economy? Is it essential to save distressed financial institutions by putting taxpayer money at risk in bailouts, or is it better to use private money in bail-ins instead? Are there better options, such as first lines of defense that help prevent such distress in the first place? Can countercyclical prudential and monetary policies lessen the likelihood and severity of the financial crises that often bring about this distress? Through careful analysis, authors Berger and Roman review and critically assess the extant theoretical and empirical research on many resolution approaches and tools. Placing special emphasis on lessons learned from one of the biggest bailouts of all time, the Troubled Asset Relief Program (TARP), while also reviewing other programs and tools, TARP and Other Bank Bailouts and Bail-Ins around the World sheds light on how best to protect the financial system on Wall Street and the real economy on Main Street.
- Presents a well-informed and rich account of bailouts, bail-ins, and other resolution approaches to resolve financially distressed banks.
- Uses TARP as a key case study of bailouts that has been thoroughly researched.
- Provides valuable research and policy guidance for dealing with future financial crises.
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I Introductory materials 1. Introduction to bank bailouts, bail-ins and the related topics covered in the book 2. Conditions that generally bring about bank bailouts, bail-ins, and other resolution methods 3. Descriptions of the TARP program, other bank bailouts and bail-ins, and other resolution approaches in the United States and around the world 4. Theoretical background on bank bailouts, bail-ins, and other resolution approaches
II Empirical research on TARP 5. Methodologies used in most of the TARP empirical studies 6. Determinants of applying for and receiving TARP funds and exiting early from the program 7. Effects of TARP on recipient banks' valuations 8. Effects of TARP on market discipline 9. Effects of TARP on bank leverage risk 10. Effects of TARP on bank competition 11. Effects of TARP on bank credit supply 12. Effects of TARP on bank portfolio risk 13. Effects of TARP on recipient banks' credit customers 14. Effects of TARP on the real economy 15. Effects of TARP on systemic risk
III Empirical evidence bank bailouts other than TARP, bail-ins, and other resolution approaches 16. Empirical research on bailouts other than TARP 17. Empirical research on bail-ins 18. Empirical research on other resolution approaches
IV First lines of defense to help avoid bailouts, bail-ins, and other resolutions 19. Mechanisms for the first lines of defense 20. Capital requirements 21. Liquidity requirements 22. Stress tests 23. Prudential regulatory activity restrictions 24. Prudential supervision 25. Deposit insurance 26. Direct government ownership of banks
V Looking toward the future 27. Social costs and benefits 28. Implications for bank policymakers and bank managers 29. Open research questions to be addressed by future research
Allen N. Berger is the H. Montague Osteen, Jr., Professor in Banking and Finance in the Finance Department, Darla Moore School of Business, University of South Carolina, since 2008. He is also Ph.D. coordinator of the Finance Department, and Carolina Distinguished Professor of the University. Outside the University, he is currently Vice President of the Financial Intermediation Research Society (FIRS), and will be its 2021 Conference Coordinator, and 2022 Program Chair and President. He is also Senior Fellow at the Wharton Financial Institutions Center and Fellow of the European Banking Center, and serves on the editorial boards of eight professional finance and economics journals. Professor Berger was editor of the Journal of Money, Credit, and Banking from 1994-2001, has co-edited seven special issues of various professional journals, and has co-organized a number of professional research conferences. He also co-edited all three editions of the Oxford Handbook of Banking, 2010, 2015, and 2019. His research covers a variety of topics related to financial institutions. He is co-author of Bank Liquidity Creation and Financial Crises (2016, Elsevier), as well as TARP and other Bank Bailouts and Bail-Ins around the World: Connecting Wall Street, Main Street, and the Financial System (2020, Elsevier).
He has published over 150 professional articles, including well over 100 in refereed journals. These include papers in top finance journals, Journal of Finance, Journal of Financial Economics, Review of Financial Studies, Journal of Financial and Quantitative Analysis, Review of Finance, Journal of Financial Intermediation and Journal of Corporate Finance; top economics journals, Journal of Political Economy, American Economic Review, Review of Economics and Statistics, and Journal of Monetary Economics; and other top professional business journals, Management Science, Journal of Business, and European Journal of Operational Research. His research has been cited over 80,000 times according to Google Scholar, including 27 different articles with over 1,000 citations. He has given invited keynote addresses on five continents, and has been a visiting scholar at several Federal Reserve Banks and central banks of other nations.
Professor Berger received the University of South Carolina Educational Foundation Award for Research in Professional Schools for 2018, and was named Professor of the Year for 2015-2016 by the Darla Moore School of Business Doctoral Students Association. He also has won a number of best paper awards from different journals and finance conferences. He was Secretary/Treasurer, Financial Intermediation Research Society (FIRS) from 2008-2016; and Senior Economist from 1989 to 2008 and Economist from 1982-1989 at the Board of Governors of the Federal Reserve System. He received a Ph.D. in Economics from the University of California, Berkeley in 1983, and a B.A. in Economics from Northwestern University in 1976.
Roman, Raluca A.
Raluca A. Roman is a Senior Economist at the Federal Reserve Bank of Philadelphia since July 2018. From 2015-2018, she was a Research Economist at Federal Reserve Bank of Kansas City. She holds a Ph.D. in Finance from University of South Carolina; an M.B.A. with a concentration in Finance from University of Bridgeport, and a B.A. in Economics from Alexandru Ioan Cuza University (Romania). Dr. Roman's research interests include topics related to banking and financial institutions (including bank government bailouts and bail-ins, bank stress tests, internationalization, and corporate governance), consumer finance (including retail credit, consumer behavior, and consumer market trends), corporate finance, and international finance. She has published three articles in the Journal of Financial and Quantitative Analysis, one in Management Science, two in the Journal of Financial Intermediation, one in Journal of Money, Credit, and Banking, one in Financial Management, one in Journal of Corporate Finance, one in Journal of Banking and Finance, one book chapter in the "Handbook of Finance and Development and one book chapter in the "Oxford Handbook of Banking, and has received four awards for her papers at conferences. She is co-authoring the book "TARP and other Bank Bailouts and Bail-Ins around the World: Connecting Wall Street, Main Street, and the Financial System (2020, Elsevier). Her research has been presented and she has discussed the research of others at numerous finance and regulatory conferences. She has more than seven years of professional experience in banking and corporate finance, and has worked for top international organizations like UBS Investment Bank and MasterCard International, where she won various awards.