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Working Paper
Money Market Fund Reform: Dealing with the Fundamental Problem
After the events in March 2020, it became clear to policymakers that the 2014 reform of the money market funds (MMFs) industry had not successfully addressed all associated stability concerns related to surges in withdrawals. In December 2021, the SEC proposed a new set of rules governing how money market funds can operate. A fundamental problem behind the instability of (some) money market funds is the expectation that backstop liquidity support will be provided by the government in the event of financial distress, along with the government's inability to credibly commit to not provide such ...
Journal Article
The check float puzzle
Journal Article
President's message : The importance of financial education
Journal Article
Noteworthy : The promise and peril of government intervention
Journal Article
Should the Fed Have a Financial Stability Mandate? Lessons from the Fed's First 100 Years
President Jeffrey Lacker and Research Publications Content Manager Renee Haltom explore the Fed's role in financial stability. Following the global financial crisis of 2007--08, the Fed has been given enhanced regulatory responsibilities to prevent future crises. However, most of the Fed's actions in pursuit of financial stability have historically come through emergency lending once crises are underway. The authors conclude that arguments in favor of emergency lending are based on erroneous readings of history. Instead, emergency lending may undermine financial stability, as well as the ...
Working Paper
Collateralized debt as the optimal contract
In a simple risk-sharing environment with ex post private information, conditions are found under which a collateralized debt contract is the optimal allocation. The critical condition for optimality is that the borrower values the collateral good more highly than does the lender; otherwise the optimal contract does not resemble debt. Limited collateral can give rise to an endogenous borrowing constraint, driving a further wedge between the intertemporal marginal rates of substitution of the borrower and the lender. I argue that perhaps all debt contracts are implicitly collateralized.
Journal Article
President's message: Economic growth: two possible paths
Journal Article
Joining Community Development and Research
Journal Article
President’s message: Big banks needs “living wills”