By Atif Mian and Amir Sufi

Proponents of fiscal stimulus argue that targeted subsidies can spur consumers to shift purchases from well into the future to today, and thereby help jumpstart the economy. Opponents contend that while subsidies may induce purchases today, the effect is almost completely reversed when consumers subsequently purchase fewer goods tomorrow. We inform this debate by examining the 2009 Cars Allowance Rebate System program, commonly known as “cash for clunkers.” The basic idea is to compare the pattern of auto purchases in cities with a high and low number of clunkers to get a sense of what would have happened in the absence of the program.

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By Raghuram Rajan
FT.com; June 2, 2010

Bankers must be heaving a sigh of relief as the shenanigans of the offshore drilling industry have pushed them to the edge of the radar screen of those targeting corporate greed. But it is unlikely their respite will be for long. Inquiries under way are bound to unearth more instances of ethically, and even legally, challenged bankers. When overlaid on images of bankers hankering after their outlandish bonuses soon after being bailed out with public money, the public picture of an industry motivated only by money and without any sense of the larger consequences of its actions will be reinforced. How do we instill more social values in the industry? Or is banker greed mostly good?

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by Christian Leuz and other members of the Shadow Financial Regulatory Committee

The recent G20 meetings demonstrated the substantial divide between policymakers over the right approach toward the “too-big-to-fail” problem for large, global financial institutions. Some policymakers accept that some financial firms will inevitably be too-big-to-fail and wish to focus policy efforts on facilitating orderly bailouts and agreeing in advance on “burden-sharing” arrangements for allocating bailout costs among countries. Other policy makers reject that view and argue that policies could be introduced that would substantially reduce the chance of a failure by a large financial institution. Furthermore, they believe that it would be possible to reform the process of resolving failed institutions to permit large, complex institution to fail, and to be wound down with significant losses to its creditors, but without generating intolerable spillovers or systemic risk.

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By Atif Mian and Amir Sufi
VoxEU

US Congressional committees are now grilling bankers on the complex instruments that provided subprime mortgages with a veil of security. This column presents new evidence that subprime mortgages had more serious consequences – they were a key factor in the US housing-price boom. When house prices faltered, subprime mortgage holders defaulted en masse, eventually leading to the global crisis.

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By Raghuram Rajan
Businessweek; April 1, 2010

The Dodd financial reform bill, which awaits the Senate after its two-week break, is loaded with good intentions. But does it do enough to keep banks from going out on a limb for profits?

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By Luigi Zingales and Oliver Hart
National Affairs, Spring 2010

The financial crisis of 2008 had many causes. They ranged from a housing bubble to excessive speculation, and from inadequate accounting rules to reckless corporate governance. But at the heart of the meltdown were the financial industry’s distorted incentives — created in large part by decades of misguided government policy — which caused bankers and investors to take enormous risks without due regard for their consequences.

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Testimony of Anil K Kashyap in “Examining the Link Between Fed Bank Supervision and Monetary Policy” before the House Financial Services Committee, United States House of Representatives - March 17, 2010

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U.S. Monetary Policy Forum; New York, New York
Frebruary 26, 2010

On Friday February 26, the IGM hosted its annual “U.S. Monetary Policy Forum” conference that featured a report on Financial Conditions Indices and a panel discussion on Financial Regulatory Reform.  The Panel was moderated by David Wessel of the Wall Street Journal and featured commentary Federal Reserve Governor Daniel Tarullo, Federal Reserve Bank of Chicago President Charles Evans, and Professor Anil Anil Kashyap.  Professor Kashyap’s speech was titled “Let’s Not Pursue the Volcker Rule.”

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Comments by Governor Daniel Tarullo
U.S. Monetary Policy Forum, New York, New York
February 26th, 2010

Daniel Tarullo, Federal Reserve Board of Governors, participated in a panel discussion at the 2010 US Monetary Policy Forum on financial regulatory reform. The panelists discussed priorities for improving financial regulation. This included an assessment of issues where a consensus is emerging as to how reform should proceed and the identification of open questions where agreement about the way forward is uncertain.  The panel discussed how regulatory choices will impact monetary policy making and other Federal Reserve responsibilities.

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The recent decision by European governments to bail out Greece has raised questions about the viability of the single currency area in Europe. Professors John Cochrane, Roger Myerson, and Luigi Zingales will discuss the bailout decision, the foundations of the euro area, and its future.  Professor Anil Kashyap moderates the panel.

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