Crashed
Page 89
current account surplus
global monitoring of, 40, 267, 353, 370
of China, 33, 75
of European Union, 75
Cyprus, 511
Czech Republic, 121, 123, 126, 227
Daewoo, 123, 256–57
Dagong, 392
Daily Express, 544
Dalio, Ray, 481
Dallara, Charles, 313, 389
Darling, Alistair, 176, 177, 186, 190, 338
Deaton, Angus, 457
debt
debt brake, in Germany, 287, 288, 289, 356, 512
emerging market debt issuance, 2008–2014, 473–75
fear of, 346–48
Germany and, 353–54, 355–56
Greece and, 14, 322, 323–45, 357–59, 376–78, 381–89, 408–10, 422–29
growth of, in eurozone, 2000–2009, 100–102, 108
Irish debt crisis, 322, 323, 359–66
Italian, 386–87, 389
Merkel-Sarkozy Deauville agreement for dealing with, 361–62
Merkel-Sarkozy-ECB plan for dealing with, 387–89
Spain and, 322, 326, 430–33
spread of Greek crisis to southern Europe, 386–88
United Kingdom and, 348–50
United States and, 350–53, 390
debt restructuring. See private sector involvement (PSI)
deflation, 11, 39
De Guindos, Luis, 437, 518
DeLong, Bradford, 36, 37, 41, 580–81, 583
Delors, Jacques, 92–93, 561
Democratic Party, 36, 191–92, 201, 613
election of 2016 and, 566, 567–68
Fannie Mae/Freddie Mac bailout and, 172, 174
GSEs political influence over, 47
stimulus package, passage of, 278–79
TARP and, 183, 184, 195
Denmark, 105
Depfa, 84, 185, 188, 207
Deripaska, Oleg, 224, 226
D’Estaing, Giscard, 112
Detroit, Michigan, 450–51
Deutsche Bank, 16–17, 73–74, 110, 195, 542
foreign acquisitions of, 75, 83
Italian bond sales of, 389
leverage of, 88
liquidity provided to, 210, 218
Dexia, 154, 185, 207, 209, 286, 326, 358, 406
Diamond, Bob, 176
Dijsselbloem, Jeroen, 518, 522, 531
Dimon, Jamie, 154, 171, 197, 402, 551
Dodd, Chris, 181, 302, 307
Dodd-Frank Act of 2010, 302–9, 542, 587–88
Collins Amendment, 307
Financial Stability Oversight Council, 303, 309
implementing regulations, 308–9
in the 2016 election, 547
legislative process, 302–6
regulation of European banks, 542
repeal of, 579, 587–591
stress-testing regime codified in, 309
systemically important financial institutions (SIFI), regulation of, 303–4
Volcker rule, 308
dollar
Fed’s liquidity efforts impact on dollar-based financial system, 218–19
fixed exchange rate system and, 32–35, 39
Nixon abandons gold peg, 1971, 11, 44, 92
pegged to gold, in Bretton Woods system, 11
Sino-American trade imbalance and fears of collapse of, 32–41
dollar-funding shortage for European banks, 8, 154–55, 203–6
Dombrovskis, Valdis, 236
dot-com bust, 10, 27, 37, 54, 59
Draghi, Mario, 94, 311, 362, 432, 531
liquidity provided to European Banks, 420–21
QE announced by, 519–20
Securities Market Programme (SMP) and, 399
supports Merkel-Sarkozy plan for fiscal discipline, 419–20
“whatever it takes” speech of, 438–43
Dresdner Bank, 74, 83, 171
Drexel Burnham Lambert, 52
Dudley, William, 204–5, 403
Dylan, Bob, 449–50
Eastern Europe
capital inflows and, 126–28
ECB failure to provide liquidity support to, 229–30
EU/NATO membership of, 121–26
EU Eastern Partnership and, 137, 489–91
financial crisis of 2008 in, 227–38
integration process, 123–26
post–cold war recession in, 120–21
structural funds for, 123
Vienna Initiative and, 233–34
West European bank investments in, 124–25, 228–29, 232–33
See also specific countries
Eastern Partnership, 137, 489–91
EBA. See European Banking Authority (EBA)
ECB. See European Central Bank (ECB)
Economist, 40, 475, 477, 604–5, 606
EFSF. See European Financial Stability Facility (EFSF)
Emanuel, Rahm, 279, 284, 295, 352
emerging market economies
collapse of 2008 and, 159
crises in, 1994–1998, 7, 32, 58, 119–20, 255–56
debt issuance of, 2008–2014, 473–75
Federal Reserve swap lines provided to central banks of, 212
safe reserve assets demand of, 58–59
taper talk, effect of, 476–79
Enron, 54
Erdogan, Tayyip, 478
escraches, 375
ESF. See Exchange Stabilization Fund (ESF)
ESM. See European Stability Mechanism (ESM)
Estonia, 121, 126, 227, 234, 491
Eurasian Customs Union, 490
euro. See eurozone
European Bank for Reconstruction and Development, 233
European Banking Authority (EBA), 315
European banks
bailouts of, 184–95
Basel II and, 85–87, 311
dollar funding crisis, 8, 154–55, 203–6
Eastern European investment by, 124–25, 228–29, 232–33
eurozone periphery (Greece, Ireland, Portugal, Spain) lending of, 325–26
financial flows between US banks and, 75–79
funding withdrawn from, 403
global credit expansion of 2000s and, 102–3
Greek bond sales of, 359
inadequate capitalization of, late 2011, 401–3
inter-Eurozone financial flows and, 103–5
leverage of, 87–88
liabilities of, 110, 111
Merkel-Sarkozy Deauville agreement for dealing with debt of, 361–62
QE2 and, 370–71
recapitalization of, 315–17, 331, 336, 357–58, 383–84, 386, 388, 401–2, 407–8, 416, 418, 422, 431–32, 436–37
reserve levels of, 90
retreat from global competition, 16–17, 542
size of, 110
sovereign euro bonds purchases of, 286
Spain’s cajas, 431–32
stress tests of, 315, 357–58, 406
US mortgage-backed securities investments of, 73–75
Vienna Initiative and, 233–34
wholesale funding withdrawn from, late 2011, 403, 418–19
See also specific banks
European Central Bank (ECB), 93, 98–100
Draghi’s “whatever it takes” speech and subsequent initiatives, 438–43
failure to provide liquidity support to Eastern Europe, 229–30
Federal Reserve liquidity swap lines and, 9–10, 211, 212, 213, 214, 342, 419–20
Greek access to liquidity capped by, 2015, 362–63
Greek debt crisis and, 333–35, 336, 340–42, 343–44, 377, 387–89
interest rate hike in 2011, effect of, 378–79
Irish debt crisis and, 362–63
Italian and Spanish bonds, ECB purchases 2011, 398–99
LTRO and other liquidity measures provided by, 420–21
price stability as mandate of, 99, 366
quantitative easing adopted by, 2015, 519–20, 534–35, 596
real estate boom and, 107–8
repo model of, 99–100
reserve levels of, 90
Securities Market Programme (SMP), 399
sovereign euro bonds, repo of, 286
unlimited liquidity provided by, August 2007, 144–45, 203
See also Draghi, Mario; Trichet, Jean-Claude
European Coal and Steel Community, 110
European Commission, 114, 193
European Financial Stability Facility (EFSF), 343, 377, 388, 400–401, 408. See also European Stability Mechanism (ESM)
European Investment Bank, 233
European Monetary System, 92–93
European Securities and Markets Authority (ESMA), 314
European Stability Mechanism (ESM), 378, 418, 421, 424–25, 437
European Systemic Risk Board, 314
European Union. See eurozone/European Union
eurozone/European Union, 91–117, 610–12
Association Agreements, 489–91
banks (See European banks)
Brexit and, 545–48, 559–60
cross-border financial flows in, 103–7
current account surplus of, 75
debt and deficits in, growth of, 100–2, 108
Eastern Europe aid packages provided by, 230, 232
Eastern Partnership, 489–91
euro, adoption of, 92–95
future of, 610–11
Greek debt crisis and, 336
initial reaction to US mortgage meltdown, 72–73
lack of mechanism to handle banking crisis, 109–12
Lisbon Treaty and, 114–15, 188, 329–30
political parties, 2014, 511–15
post-Brexit elections, 562
post–cold war expansion of, 121–22
real estate booms in, 105–9
Syriza-Eurogroup debt restructuring confrontation, 517–35
US mortgage-backed securities investments of, 73–75
See also eurozone financial crisis; specific countries
eurozone financial crisis, 6, 7, 13–18, 91, 610, 613–14
austerity and (See austerity)
demonstrations during, 340, 374–76, 394–95, 409
elections of 2012 and, 428–30
European Financial Stability Facility (EFSF) and, 343, 377, 388, 400–401, 408
European Stability Mechanism (ESM) and, 378, 418, 421, 424–25, 437
fiscal compact, 416–18, 423–24, 545
geopolitics and, 20, 125, 139, 489
Greek debt crisis, 14, 322, 323–45, 357–59, 376–78, 381–89, 408–10, 422–29
Growth Pact and, 435–37
inadequate bank capitalization, late 2011, 401–3
interbank credit implosion and, 9
Irish debt crisis and, 322, 323, 359–66
long-term consequences of, 15–16
Merkel-Sarkozy-ECB plan for dealing with, 387–89
mistakes in management of, 14–18
money flight from periphery to Germany, 379–81
political impasse in finding solution to, 404–21
private sector involvement (See private sector involvement (PSI))
QE2, liquidity provided by, 370–71
Spanish housing bubble bust and, 430–32
S&P sovereign downgrades, 421
unemployment and, 374
wholesale funding withdrawn from European banks and, 403, 418–19
Exchange Stabilization Fund (ESF), 179
extend-and-pretend, 325, 328, 331, 336, 358–59, 376, 382–83, 401, 425, 529, 532
Fannie Mae, 46, 55–56, 63–64, 172
bailout of, 172–75
Russian sale of bonds of, 137
See also government-sponsored enterprises (GSEs)
Farage, Nigel, 552–53
FDP, 329, 339, 356, 377, 511, 512, 611
Federal Deposit Insurance Corporation (FDIC), 180, 196
Basel II capital requirements opposed by, 87
Dodd-Frank Act and, 303, 305, 307
Federal Home Loan Mortgage Corporation. See Freddie Mac
Federal Housing Enterprises Financial Safety and Soundness Act of 1992, 47
Federal Reserve
AIG bailout and, 178
China’s yuan panic of 2015 and, 606–7
CHOICE Act and, 589–90
Comprehensive Capital Analysis and Review, 310–11
Dodd-Frank Act and, 304, 305
dual mandate of, 366
interest rate hikes, 2015-2018, 590, 608
Lehman collapse and, 176–77
as liquidity providers of last resort to global banking system, 9–10, 11–12, 202–3, 206–21
low interest rate policy, investment climate created by, 472–75
quantitative easing (See quantitative easing (QE))
short-term interest rate policy of, 2000–2006, 37–38, 55–56, 69–70
stress tests, 298–301
Volcker shock, 11, 37, 43–44, 46, 50, 68
Fekter, Maria, 404
Ferguson, Niall, 35, 346–47, 368
FIAT, 123
financial crisis of 2007–2009, 1–4, 143–69, 609–10, 613, 614
ABCP market, implosion of, 146–47
AIG and, 150–52, 178–79
automobile industry and, 157–59, 449–50
Bear Stearns collapse and, 147–48
bursting of housing bubble and initial mortgage lender failures, 143–45
China and, 7, 242–54
credit default swaps and, 150–51
dollar-funding shortage for European banks and, 8, 154–55, 203–6
in East and Southeast Asia, 257–61
in Eastern Europe, 220–38
election of 2016, impact on, 566–67, 574–75
European banks funding crisis and, 8, 154–55, 203–6
European banks US mortgage market exposure, 73–75
Federal Reserve as liquidity provider to global banking system, 9–10, 11–12, 202–3
G20 and, 261–75
global nature of, 5–6, 159–60
household wealth lost in, 156–57
Keynesian macroeconomics as inadequate to understanding, 8–9
Lehman Brothers collapse and, 149, 176–77
lending, collapse in, 155–56
liquidity crisis (See liquidity crisis)
money market mutual funds (MMF) and, 152–53
Northern Rock collapse and, 145–46
Rajan’s warning of financial risks and, 67–68
regulatory changes and, 69
repo market, run on, 146–50
syndicated loans, drop in, 153–54
Wall Street versus Main Street in, 164–65
financial reform, 301–17
Basel III accord, 311–14
Dodd-Frank Act of 2010, 302–9
entanglement of regulators, law firms and banks, 309–11
Larosière committee recommendations, 314–15
Financial Services Authority (FSA), 81, 541
Financial Services Modernization Act of 1999, 68, 82
Financial Stability Board, 269–70, 311
Financial Stability Forum (FSF), 89
Financial Stability Oversight Council, 303, 309
Financial Times, 481, 5
25, 526, 587
Fink, Larry, 481
Finland, 105, 421
fiscal compact. See eurozone financial crisis
Fisher, Richard, 476
Fitch, 49, 64, 338, 536
fixed exchange rate system, 32–35, 39, 92–93
Fix the Debt campaign, 464
flash crash, 341
FN. See National Front (FN)
foreclosures, 156, 280, 281, 306, 321, 366
Foreign Affairs, 35
Fortis, 154, 185, 209, 358
France, 167, 322
bank bailouts in, 193, 194
East European crises and, 4, 138, 502
elections 2012, 429
elections 2017, 562
European elections 2014, 513
frank fort policy of, 92
Greek bailout and, 325–26, 328, 531
S&P downgrades sovereign debt of, 421
Spanish crisis 2012 and, 434–35
See also eurozone financial crisis; Sarkozy, Nicolas
Frank, Barney, 176, 302, 303, 305
Freddie Mac, 46, 55–56, 63–64, 172
bailout of, 172–75
Russian sale of bonds of, 137
See also government-sponsored enterprises (GSEs)
Fridman, Mikhail, 224–25
Friedman, Milton, 38–39
Froman, Michael, 200–201
FSA. See Financial Services Authority (FSA)
FSF. See Financial Stability Forum (FSF)
Fuld, Richard, 65
Furman, Jason, 461, 524
G20, 261–75
Basel III regime and, 311–13
Cannes meeting, 2011, 409–11, 412–14
China’s call for new Bretton Woods arrangement, 266–68
creation of, 261–62
discretionary fiscal response of, 273–75
fiscal consolidation and, 354
London summit, 266–72, 287, 289
Los Cabos meeting, 2012, 433–34
opposition to QE2 at, 368–70
taper tantrum and, 478–79
Trump administration and, 592, 595
turns down European request for assistance 2012, 422
Gaddafi, Muammar, 373, 488
Gao Xiqing, 240, 241, 254
Gazprom, 129, 131, 133, 223, 238, 505
Geithner, Tim, 162, 164, 261, 290, 316, 365, 410–11, 460
against bank nationalization or breakups, 294, 295, 296–98
Dodd-Frank Act and, 301–2, 303, 304, 305, 309
eurozone crisis and, 404–5, 410–11, 440
on global currency, 267–68
on Lehman collapse, 176, 177
on liquidity swap lines, 206, 211
memoir, Stress Test, 181, 410–11, 440
Powell Doctrine applied to international finance by, 169