Connectedness and Contagion

Connectedness and Contagion

Protecting the Financial System From Panics

Book - 2016
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MIT Press

An argument that contagion is the most significant risk facing the financial system and that Dodd¬Frank has reduced the government's ability to respond effectively.

The Dodd–Frank Act of 2010 was intended to reform financial policies in order to prevent another massive crisis such as the financial meltdown of 2008. Dodd–Frank is largely premised on the diagnosis that connectedness was the major problem in that crisis—that is, that financial institutions were overexposed to one another, resulting in a possible chain reaction of failures. In this book, Hal Scott argues that it is not connectedness but contagion that is the most significant element of systemic risk facing the financial system. Contagion is an indiscriminate run by short-term creditors of financial institutions that can render otherwise solvent institutions insolvent. It poses a serious risk because, as Scott explains, our financial system still depends on approximately $7.4 to $8.2 trillion of runnable and uninsured short-term liabilities, 60 percent of which are held by nonbanks.

Scott argues that efforts by the Federal Reserve, the FDIC, and the Treasury to stop the contagion that exploded after the bankruptcy of Lehman Brothers lessened the economic damage. And yet Congress, spurred by the public's aversion to bailouts, has dramatically weakened the power of the government to respond to contagion, including limitations on the Fed's powers as a lender of last resort. Offering uniquely detailed forensic analyses of the Lehman Brothers and AIG failures, and suggesting alternative regulatory approaches, Scott makes the case that we need to restore and strengthen our weapons for fighting contagion.


An argument that contagion is the most significant risk facing the financial system and that Dodd¬Frank has reduced the government's ability to respond effectively.

Publisher: Cambridge, MA : The MIT Press, [2016]
ISBN: 9780262034371
0262034379
Branch Call Number: 339.53 Sco842c 2016
Characteristics: xxi, 416 pages ; 24 cm

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StarGladiator
Jun 01, 2016

I had to read this from the bookstore, couldn't believe they are still writing this bullcrap, just wonder who is paying them to do so.
The author is regurgitating the same tiresome memes which fit their agenda - - much in the same way endless nimrods and doofuses [Dan Rather, Vincent Bugliosi, Posner, et cetera] claim to agree with something they have NEVER even read: the Warren Commission Report.
This guy read through all of the Dodd-Frank Act the way I did? I seriously effing doubt it!!!!!!!!!!!!!!!!!
What Dodd-Frank does and did is primarily to allow stealth bailouts at the clearinghouse level [the banks own all the clearinghouses and financial exchanges, something these authors never tell the reader] and allowed for certain times of derivatives [energy swaps, et cetera] to be morphed into other types of derivatives, benefitting the banksters and oil company types; and BOLI or Bank Owned Life Insurance, whereby the banksters take out humongous life insurance policies on their employees, then collect a fortune whenever they want [and the deaths of their employees are ruled TRADE SECRETS by the police departments !?!?!?], plus one or two other items per se.
From the description: // Scott argues that efforts by the Federal Reserve, the FDIC, and the Treasury to stop the contagion \\ Quite the opposite, Scotty, quite the opposite! Just ask yourself this: has inequality become greater and those plutocrats responsible become richer? You know the answer . . . .

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