commercial paper, 79–83
Consumer Financial Protection Bureau, 121, 125
consumer price index (CPI), 31, 32, 38, 39
consumer spending, 59–60
contagion, 91, 127
Council of Economic Advisors, 61
Credit-Anstalt, 16
credit default swaps (CDSs), 49–50
credit markets since the financial crisis of 2008–2009, 112–15
currency swaps, 92–93, 98, 103–4
debt, federal, 115
debt-service ratio, 43–45
deflation, 107, 125–26; gold standard and, 13–14; during the Great Depression, 21, 22; liquidationist theory and, 20
delinquencies, mortgage, 47
Dexia, 92
discount window, 77
Dodd-Frank Act, 90, 118–21, 128
dot-com bubble, 47–48, 60
economic growth, future, 116–17
England. See United Kingdom
European Central Bank, 53, 92–93, 104
exchange rates: global recessions and, 28; gold standard and, 11–12
exports, 59–60
Fannie Mae, 50, 62, 65–66, 69, 127; insolvency of, 72–73
federal debt, 115
Federal Deposit Insurance Corporation (FDIC), 4, 5, 22, 98, 120; financial panics before the existence of, 6
federal funds rate, 100–102
Federal Housing Finance Agency, 125
Federal Open Market Committee (FOMC), 35, 100, 108
Federal Reserve: actions during the 2008–2009 financial crisis, 50–52, 75–77, 98–99; actions during the Great Depression, 21–22, 23–24, 74; balance sheet, 102–6; Board of Governors, 15, 100–101; creation of, 8, 9; districts, 15; educating the public, 122–23; failures of, 23; Fannie Mae/Freddie Mac and, 72–73; federal funds rate, 100–102; fine tuning by, 34; gold standard and, 14; Great Moderation and, 38–42; large-scale asset purchases, 102–8, 123–24; as lender of last resort, 4, 22, 77, 99–100; macroeconomic stability during the 1950s and 1960s and, 31; objectives, 107; tools available to, 126–28; transparency, 62–63. See also central banks
Federal Reserve Act of 1913, 14, 78
Fed-Treasury Accord of 1951, 30
financial crisis of 2008–2009, the, 1–2; as a classic financial crisis, 71–72; commercial paper and, 79–83; Congress’ actions during, 97–98; consequences, 54–56; credit markets since, 112–15; currency swaps during, 92–93, 98; Dodd-Frank Act and, 90, 118–21; failure of financial firms during, 73–74; Federal Reserve actions during, 50–52, 75–77, 98–99;
future economic growth and, 116–17; global cooperation and, 74–75, 87, 91–93; housing market and, 41–48, 111–14; interbank interest rates during, 75–76; large-scale asset purchases by
the Federal Reserve during, 102–8; mortgage-backed securities (MBSs) and, 65–66, 69–72, 85; mortgage quality and, 42–45, 53, 59, 61–62, 66–69, 88–90; public sector vulnerabilities and, 65–66; recovery from, 109–12, 127–29; regulatory reform since, 117–21; short-term
funding and, 72; subprime mortgage securitization and, 69–71; unemployment since, 110–11; vulnerabilities that led to, 48–50, 64–65
financial panics, 1–2, 4; of 1907, 9; classic, 71; clearing houses and, 8–9; contagion in, 91, 127; definition of, 5–6; liquidity and, 5–8, 79–83; periodic nature of, 122
Financial Stability Oversight Council (FSOC), 118–19
fine tuning, 34
France, 28
Freddie Mac, 50, 62, 65–66, 69, 127; insolvency of, 72–73
Friedman, Milton, 10–11, 32–33, 34, 40, 104
Galbraith, John Kenneth, 16–17
gasoline rationing, 33
Germany, 19, 28, 52–53
global cooperation during the financial crisis of 2008–2009, 74–75, 87, 91–93 Goldman Sachs, 78
gold standard, 10–14, 21, 26; arguments for returning to, 24–25
government debt, 115
government-sponsored enterprises (GSEs), 50, 62, 65–66, 102–4
Great Depression, the, 1, 6, 16–23, 26–28, 38, 107, 116, 122; causes of, 1920; Federal Reserve actions during, 21–22, 23–24, 74; GDP during, 17–18; lessons from, 74; stock market prices during, 87–88; unemployment during, 18–19, 27; worldwide impact of, 16
Great Moderation, 1, 38–42, 48, 65
Great Society, 33
Great Stagflation, 38
Greece, 115
Greenspan, Alan, 37–38, 58, 63, 101, 107
gross domestic product (GDP), 87, 109, 110; during the Great Depression, 17–18;
Great Moderation and, 38–40
Hamilton, Alexander, 15
HARP program, 125
Hitler, Adolf, 19
Hoover, Herbert, 20
housing market and bubble, 41–48, 52–54, 58–59, 60–61, 106–7, 126–27; HARP program and, 124–25; overconfidence and the, 89–90; recovery since the financial crisis of 2008–2009, 111–14. See also mortgage quality and types
inflation, 31, 108–9; consumer price index, 38, 39; gold standard and, 13, 24; interest rates and, 35–36; mission of central banks to control, 29; Paul Volcker and, 35; during the 1970s, 31–32; timing of monetary policy and, 56–58; unemployment and, 32–33; wage-price controls and, 34
interest rates, 3, 23–24; adjustable rate mortgages and, 66–67; federal funds rate, 100–102; inflation and, 35–36;
interbank, 75–76; risk taking and, 60; during World War II, 30
inventory, business, 40–41
investors: asset-backed securities and, 78, 123–24; Fed guidance to, 109; money market funds and, 78; mortgage-backed securities and, 65–66, 69–73; short-term funding and, 72; wholesale funding and, 72
Ireland, 115
Italy, 128
It’s a Wonderful Life, 5, 7
JPMorgan Chase, 72, 84
just-in-time inventory management, 40–41
Keynes, John Maynard, 12
large-scale asset purchases (LSAPs), 102–8, 123–24
Lehman Brothers, 50, 73, 75, 78, 80–83, 92, 94–95, 117
lender of last resort, Federal Reserve as, 4, 22, 77, 99–100
liquidationist theory, 20
liquidity, 4; clearing houses and, 8–9; commercial paper and, 79–83; during the 2008–2009 financial crisis, 75–77; financial panics and, 5–8; off-balance-sheet vehicles, 93–94; Volcker Rule and, 90–91
Lombard Street, 97
Martin, William McChesney, 31
Mellon, Andrew, 20
Merrill Lynch, 50, 73, 78
monetary policy, 126–27; educating the public on, 122–23; federal funds rate, 100–102; financial crisis of 2008–2009 and, 52, 108–9, 115; gold standard and, 10–14, 21, 24–25; during the Great Depression, 21–22; during the Great
Moderation, 38–42; inflation and easy, 31–33; inflation during the 1970s and, 31–32; promoting exports, 59–60; 1950s and 1960s, 31; timing of, 56–58; during World War II, 29–30
money market funds, 79–83
money supply and gold standard, 11
Morgan Stanley, 78
mortgage-backed securities (MBSs), 65–66, 69–73, 85
mortgage quality and types, 42–45, 53, 59, 61–62, 66–69, 73, 88–90, 106–7; HARP program and, 125; since the financial crisis of 2008–2009, 113–14
National Bureau of Economic Research, 109
National Recovery Act, 22
New York Clearing House, 8
Nixon, Richard, 34
no-documentation loans, 67, 68
nonprime mortgages, 43, 44, 67–69
off-balance-sheet vehicles, 93–94
Office of the Comptroller of the Currency, 4, 51
Office of Thrift Supervision, 50, 51
oil prices, 33
OPEC (Organization of the Petroleum Exporting Countries), 33, 37 overconfidence in the housing market, 89–90
Portugal, 115, 128
quantitative easing (QE), 102, 107
rating ag
encies, 69–71, 96
Reagan, Ronald, 37
recessions: 2001, 41, 48; during the Great Depression, 26; inflation and, 36–37;
recovery from, 109–12
recovery from the financial crisis of 2008–2009, 109–12, 127–29
regulation and supervision by central banks, 4
regulatory reform, 117–21
Roosevelt, Franklin, 21, 22–23, 26
Shiller, Robert, 53
short-term funding, 72
short-term securities trading, 90–91
silver and the gold standard, 14
Spain, 52–53, 128
speculative attack and gold standard, 12–13
stated income mortgage loans, 67, 68
Stewart, Jimmy, 5, 7
stocks: market crash of 1987, 41; prices during the Great Depression, 87–88
subprime mortgage securitization, 69–71
tech bubble, 47–48, 60
transparency, 62–63
Treasury securities, 102–4, 124
Troubled Asset Relief Program (TARP), 94–95, 97–98
unemployment, 58, 87, 110–11, 115, 127–28; during the Great Depression, 18–19, 26–27; high interest rates and, 36, 37; inflation and, 32–33
United Kingdom, 28, 52, 75, 92; Bank of England, 5, 7, 12–13, 25
Vietnam War, 31, 33
Volcker, Paul, 35–37, 40, 58, 63, 107
Volcker Rule, 90–91, 119
Wachovia, 73
wage-price controls, 34
Wall Street Reform and Consumer Protection Act. See Dodd-Frank Act
war debt, 30
Washington Mutual, 73
Wells Fargo, 73
wholesale funding, 72
Wilson, Woodrow, 8, 14, 15
World War I, 19, 25
World War II, 19, 27, 121; debt after, 30; Great Depression end at the start of, 29–30
Yom Kippur War, 33
The Federal Reserve and the Financial Crisis Page 13
