Leverage? What Leverage? A Deep Dive into the U.S. Flow of Funds in Search of Clues to the Global Crisis
June 1, 2012
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Summary
This paper questions the view that leverage should have forewarned us of the global financial crisis of 2007-09, pointing to several gearing indicators that were neither useful portents of the onset of the crisis nor of its ferocity. Instead it shows, first, that the use of ill-suited collateral in the secured funding operations of U.S.-based investment banks was the fatal link between the collapse of structured finance and the global malfunction of funding markets that turbocharged the downdraft; and, second, that this insight (and others) can be decrypted from the Flow of Funds Accounts of the United States.
Subject: Commercial banks, Credit, Financial sector, Flow of funds, Securities
Keywords: bank deposit, credit funding, leveraged securities dealer, private sector, security credit, WP
Pages:
30
Volume:
2012
DOI:
Issue:
162
Series:
Working Paper No. 2012/162
Stock No:
WPIEA2012162
ISBN:
9781475504712
ISSN:
1018-5941
