Gambling for resurrection in Iceland

Friðrik Már Baldursson, Richard Portes, 6 January 2014

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The demise of the three large Icelandic banks, just after the fall of Lehman Brothers, was a key event in the spread of the financial crisis. A couple of weeks before its collapse in October 2008, Kaupthing bank announced that the Qatari investor Sheikh Mohammed Bin Khalifa Bin Hamad al-Thani had bought a 5.01% stake. This briefly boosted market confidence in Kaupthing (Financial Times 2008).

Topics: Financial markets
Tags: banking, banks, financial crisis, gambling for resurrection, Iceland, moral hazard

Joint liability in international lending: A proposal for amending the Treaty of Lisbon

Kaushik Basu, Joseph Stiglitz, 2 January 2014

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The sovereign debt crisis exposed weaknesses in the Eurozone’s financial architecture that may not have been fully anticipated when the founding treaties of the Eurozone were drafted. Key among these weak spots are the provisions of the Treaty of Lisbon which regulate intergovernmental debt obligations and preclude direct financing of sovereigns by the ECB.

Topics: EU institutions, International finance
Tags: eurozone, Eurozone crisis, Lisbon Treaty, Maastricht Treaty, moral hazard, no-bailout clause, sovereign debt

A game changer: The EU banking recovery and resolution directive

Thomas Huertas, María J Nieto, 19 September 2013

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To end moral hazard and “too big to fail”, investors, not taxpayers, should bear the loss associated with bank failures. Recently, ECOFIN took a major step in this direction. It agreed a common position with respect to the Banking Recovery and Resolution Directive. If confirmed in the trialogue with the Commission and the European Parliament, the Directive will:

Topics: Financial markets
Tags: banks, moral hazard, Too big to fail

Coping with financial crises: Latin American answers to European questions

Eduardo Cavallo, Eduardo Fernandez-Arias, 17 October 2012

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Many peripheral Eurozone countries are suffering from financial and competitiveness problems reminiscent of previous Latin American challenges. The analogy has been noticed many times.

Topics: Global crisis
Tags: Eurozone crisis, Latin America, moral hazard

A failsafe way to end the Eurozone crisis

Charles Wyplosz, 26 September 2011

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The annual gathering of finance ministers and central bank governors at the IMF/World Bank meetings in Washington seems to have been an epiphany for Eurozone leaders. Finally, there seems to be agreement that their July 2011 agreement was insufficient (Reuters 2011).

Topics: Global crisis
Tags: debt guarantee, ECB, EFSF, Eurozone crisis, moral hazard

Crisis contracts

Hans Gersbach, 2 April 2011

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There is anything but a dearth of proposals on how banks and bank-related financial institutions could be more stringently regulated and monitored by the government with a view to avoiding the recurrence of a crippling crisis like the one we have been labouring under for the past two years (e.g.

Topics: Financial markets, Global crisis, International finance
Tags: Bankers’ bonuses, financial regulation, moral hazard

Deposit insurance without commitment: Wall Street vs. Main Street

Russell Cooper, Hubert Kempf, 18 February 2011

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The events which followed the subprime crisis, which started in August 2007, were shocking news to many economists. Bank runs were back!

Topics: Financial markets, Global crisis, International finance
Tags: bank runs, financial regulation, moral hazard

Titian, Veronese, Caravaggio and their rivals: Evidence of competition in the market for altarpieces of the 17th century

Federico Etro, 4 November 2010

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Art is often perceived, and sometimes defined, as handmade work that is valuable independently of its objective features and is the fruit of pure talent and inspiration independent from monetary and contractual incentives. This emphasis on the invaluable is even more pronounced for religious paintings by old masters as Titian, Veronese, or Caravaggio.

Topics: Frontiers of economic research, Labour markets
Tags: art, contract theory, Labour Markets, moral hazard, paintings

Financial regulation: Can we avoid another great recession?

John Van Reenen, 4 May 2010

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The financial meltdown led to the worst post-war recession experienced by the UK and other advanced economies. The global Great Recession originated in the financial services sector, especially after the collapse of Lehman in September 2008.

Topics: Financial markets, Global crisis
Tags: financial regulation, global crisis, moral hazard

Bankers’ bonuses: Claw-back clauses are critical

Brian Bell, John Van Reenen, 3 May 2010

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Over the last decade, bonuses in the financial sector have exploded. In the UK, the vast majority of the gains at the top of the income distribution have come from such “bankers’ bonuses”. The bonus culture has been highlighted as one of the contributing factors to the financial crisis, and it is a hot political issue, particularly in the election-poised UK.

Topics: Financial markets, Global crisis, Labour markets, Poverty and income inequality
Tags: Bankers’ bonuses, Inequality, moral hazard

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