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Financial Crises and Bank Capital

  • Robert Z. Aliber
Chapter

Abstract

Robert Aliber discusses the reasons for bank failures and financial crises. He makes three main points. First, US macroeconomic stability would be increased if the US Congress established a government agency to provide capital to individual banks after a systemic crisis causes large loan losses. Second, the crisis of 2008 is explained by a surge in the export earnings and the trade surpluses of China and the oil-exporting countries, and of the increase in their demand for foreign securities on the prices of real estate and stocks in the United States and other countries that had capital inflows. The higher asset prices then caused increased consumption and current account deficits. Third, there is a criticism of Dodd-Frank. The premise of Dodd Frank is that the crisis resulted from the decisions by banks to increase their purchases of risky securities rather than from a surge in the supply of credit from an increase in the capital account surpluses. Dodd Frank does nothing to dampen cyclical increases in investor demand for US dollar securities

Copyright information

© The Author(s) 2019

Authors and Affiliations

  • Robert Z. Aliber
    • 1
  1. 1.Booth School of BusinessUniversity of ChicagoChicagoUSA

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