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Univ. of Toledo College of Law

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Sunday, March 8, 2009

Schwarcz on Financial Safety Net

Too Big to Fail?: Recasting the Financial Safety Net, by Steven L. Schwarcz, Duke University - School of Law, was recently posted on SSRN.  Here is the abstract:

Government safety nets in the United States and abroad focus, anachronistically, on problems of banks and other financial institutions, largely ignoring financial markets which have become major credit sources for consumers and companies. Besides failing to protect these markets, this narrow focus encourages morally hazardous behavior by large institutions, like AIG and Citigroup, that are "too big to fail." This paper examines how a safety net should be recast to protect financial markets and also explains why that safety net would mitigate moral hazard and help resolve the too-big-to-fail dilemma

http://lawprofessors.typepad.com/securities/2009/03/schwarcz-on-fin.html

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