Rosalind Wiggins | Yale University (original) (raw)

Papers by Rosalind Wiggins

Research paper thumbnail of The Lehman Brothers Bankruptcy A: Overview

The Journal of Financial Crises, 2019

On September 15, 2008, Lehman Brothers Holdings, Inc., the fourth-largest U.S. investment bank, s... more On September 15, 2008, Lehman Brothers Holdings, Inc., the fourth-largest U.S. investment bank, sought Chapter 11 protection, initiating the largest bankruptcy proceeding in U.S. history. The demise of the 164-year old firm was a seminal event in the global financial crisis. Under the direction of its long-time Chief Executive Officer Richard Fuld, Lehman had been very successful pursuing a high-leverage, high-risk business model that required it to daily raise billions of dollars to fund its operations. Beginning in 2006, Lehman began to invest aggressively in real-estate-related assets and soon had significant exposures to housing and subprime mortgages, just as these markets began to sour. Lehman employed a cadre of accountants and risk professionals to continually monitor its balance sheet, key ratios, and risks. It undertook desperate and questionable actions to stay alive. Nevertheless, Lehman ultimately failed because of an inability to finance itself. This overview case provides background information about Lehman's business and key personnel and also the economic _____________________________________________________________________ 1 This case study is one of eight Yale Program on Financial Stability (YPFS) case modules considering the Lehman Brothers Bankruptcy:

Research paper thumbnail of The Rescue of American International Group Module Z: Overview

The Journal of Financial Crises, 2021

In September 2008, in the midst of the broader financial crisis, the Federal Reserve Board of Gov... more In September 2008, in the midst of the broader financial crisis, the Federal Reserve Board of Governors used its emergency authority under Section 13(3) of the Federal Reserve Act to authorize the largest loan in its history, a 85billioncollateralizedcreditlinetoAmericanInternationalGroup(AIG),a85 billion collateralized credit line to American International Group (AIG), a 85billioncollateralizedcreditlinetoAmericanInternationalGroup(AIG),a1 trillion insurance and financial company that was experiencing severe liquidity strains. In connection with the loan, the government received an equity interest representing 79.9% of the company's ownership. AIG continued to experience a depressed stock price, asset devaluations, and the risk of ratings downgrades leading to questions about its solvency. To stabilize the company, the government committed additional assistance, including equity investments under the Troubled Assets Relief Program and asset purchases, for a total commitment of 182.3billion.AIGsurvivedasasmallerentityandrepaidallamountsowedtothegovernment,which,alongwiththegovernment′ssaleofitsAIGequitystake,resultedinaprofitof182.3 billion. AIG survived as a smaller entity and repaid all amounts owed to the government, which, along with the government's sale of its AIG equity stake, resulted in a profit of 182.3billion.AIGsurvivedasasmallerentityandrepaidallamountsowedtothegovernment,which,alongwiththegovernment′ssaleofitsAIGequitystake,resultedinaprofitof22.7 billion for the government and taxpayers (Treasury 2013, 14). In this case we discuss the government's actions on an aggregate basis and analyze how the rescue was conceived and executed in order to better understand the unique lessons to be learned and possibly applied to future crisis events. _____________________________________________________________________ 1 This is one on of seven YPFS case modules, all published in 2021, that consider the various elements of the government's rescue of American International Group. See page 5 for a complete list of the cases which are available from the Journal of Financial Crises at https://elischolar.library.yale.edu/journal-of-financial-crises/.

Research paper thumbnail of The Lehman Brothers Bankruptcy E: The Effects on Lehman’s U.S. Broker-Dealer

The Journal of Financial Crises, 2019

Lehman's U.S. broker-dealer, Lehman Brothers Inc. (LBI), was excluded from the parent company's b... more Lehman's U.S. broker-dealer, Lehman Brothers Inc. (LBI), was excluded from the parent company's bankruptcy filing on September 15, 2008, because it was thought that the solvent subsidiary might be able to wind down its affairs in a normal fashion. However, the force of the parent's demise proved too strong, and within days, LBI and dozens of Lehman subsidiaries around the world were also in liquidation. As a regulated broker-dealer, LBI was required to comply with the Securities and Exchange Commission financial-responsibility rules for broker-dealers, including maintaining customer assets separately. However, the corporate complexity and enterprise integration that characterized the Lehman group conflicted with this mandate. Omnibus cash accounts and wide-flung assets complicated the liquidation. It became clear in the course of the liquidation that the broker-dealer rules did not adequately address these issues or others raised by the infrastructure complexity and global reach of the companies to which they applied. This led some observers to question whether the rules should be revised and whether the broker-dealer should be excluded from all but minimal integration into the holding company's non-regulated businesses. _____________________________________________________________________ 1 References in this case study are hyperlinked to original sources wherever possible. This case study is one of eight Yale Program on Financial Stability (YPFS) case modules considering the Lehman Brothers Bankruptcy:

Research paper thumbnail of European Central Bank Tools and Policy Actions A: Open Market Operations, Collateral Expansion and Standing Facilities

The Journal of Financial Crises, 2019

Beginning in August 2007, the European Central Bank (ECB) used standard and nonstandard monetary ... more Beginning in August 2007, the European Central Bank (ECB) used standard and nonstandard monetary policies as the global financial markets progressed from initial turmoil to a widespread sovereign debt crisis. This case describes the key features of the ECB's asset purchase programs throughout the Global Financial Crisis and subsequent European sovereign debt crisis. These programs include the Covered Bond Purchase Programs (

Research paper thumbnail of European Central Bank Tools and Policy Actions B: Asset Purchase Programs

The Journal of Financial Crises, 2019

Beginning in August 2007, the European Central Bank (ECB) used standard and nonstandard monetary ... more Beginning in August 2007, the European Central Bank (ECB) used standard and nonstandard monetary policies as the global financial markets progressed from initial turmoil to a widespread sovereign debt crisis. This case describes the key features of the ECB's asset purchase programs throughout the Global Financial Crisis and subsequent European sovereign debt crisis. These programs include the Covered Bond Purchase Programs (

Research paper thumbnail of The Role of Ernst & Young

For many years prior to its demise, Lehman Brothers employed Ernst & Young (EY) as the firm’s... more For many years prior to its demise, Lehman Brothers employed Ernst & Young (EY) as the firm’s independent auditors to review its financial statements and express an opinion as to whether they fairly represented the company’s financial position. EY was supposed to try to detect fraud, determine whether a matter should be publicly disclosed, and communicate certain issues to Lehman’s Board audit committee. After Lehman filed for bankruptcy, it was discovered that the firm had employed questionable accounting with regard to an unorthodox financing transaction, Repo 105, which it used to make its results appear better than they were. EY was aware of Lehman’s use of Repo 105, and its failure to disclose its use. EY also knew that Lehman included in its liquidity pool assets that were impaired. When questioned, EY insisted that it had done nothing wrong. However, Anton R. Valukas, the Lehman bankruptcy examiner, concluded that EY had not fulfilled its duties and that probable claims existed against EY for malpractice. In this case, participants will consider the role and effectiveness of independent auditors in ensuring complete and accurate financial statements and related public disclosure.

Research paper thumbnail of The Effect on Lehman's U.S. Broker -Dealer

Research paper thumbnail of The Lehman Brothers Bankruptcy C: Managing the Balance Sheet Through the Use of Repo 105

Social Science Research Network, 2014

Anton R. Valukas, the Lehman Brothers court-appointed bankruptcy examiner, produced a 2,200-page ... more Anton R. Valukas, the Lehman Brothers court-appointed bankruptcy examiner, produced a 2,200-page report detailing possible claims that the estate might pursue, and he identified several, from company officers to its independent auditors. The most startling revelation of the report, however, was that, during its last year, Lehman had relied heavily on an unusual financing transaction-Repo 105. The examiner concluded that Lehman's aggressive use of Repo 105 transactions enabled it to remove up to $50 billion of assets from its balance sheet at quarter-end and to manipulate its leverage ratio so that it could report more favorable numbers. This case considers in-depth Lehman's questionable use of Repo 105 transactions and its impact.

Research paper thumbnail of European Central Bank Monetary Policy Operations During the Crisis A: Open Market Operations, Collateral Expansion and Standing Facilities

Social Science Research Network, 2015

Research paper thumbnail of Editors’ Note: Fighting the COVID-19 Pandemic Financial Crisis

Research paper thumbnail of Cross-Border Resolution—Dexia Group

In September 2008, Dexia Group, SA, the world’s largest provider of public finance, experienced a... more In September 2008, Dexia Group, SA, the world’s largest provider of public finance, experienced a sudden liquidity crisis. In response, the governments of Belgium, France, and Luxembourg provided the company a capital infusion and credit support. In February 2010, the company adopted a European Union (EU)-approved restructuring plan that required it to scale back its businesses and cease proprietary trading. In June 2011, Dexia withdrew from the governmentsponsored credit support program before its expiration date, and in July, the company announced that it had passed an EU stress test. However, just three months later, Dexia wrote down its substantial position in Greek debt and posted its largest loss ever. The company’s shares plummeted, and its Common Equity Tier 1 capital became negative. To avoid a disorderly resolution, the governments of Belgium, France, and Luxembourg nationalized Dexia’s assets. This case examines the attempted rescue of Dexia, provides an analysis of the successes and failures of that cross-border effort, and discusses the impact that Dexia’s holdings of sovereign debt had on the company’s viability and on the ability of its host countries to rescue it. 1 This module is one of four produced by the Yale Program on Financial Stability (YPFS), considering the European Banking Union. Other modules are: • European Banking Union A: The Single Supervisory Mechanism • European Banking Union B: The Single Resolution Mechanism • European Banking Union C: Cross-Border Resolution—Fortis Group 2 Project Editor, Case Study and Research, YPFS (Yale Program on Financial Stability), Yale School of Management. 3 Economist, Deutsche Bundesbank, Frankfurt/Main Financial Stability Department and Research Department. This coauthor’s contribution represents her personal opinions and do not necessarily reflect the views of the Deutsche Bundesbank or its staff. 4 Michael H. Jordan Professor of Finance and Management, and YPFS Program Director, Yale School of Management. _____________________________________________________________________

Research paper thumbnail of United States: Swaps to Mexico, 1994

Research paper thumbnail of Eurozone: Central Bank Swaps to Ireland and the United Kingdom, 2010

Research paper thumbnail of European Banking Union C: Cross-Border Resolution–Fortis Group

The Journal of Financial Crises, 2019

In August 2007, Fortis Group, Belgium's largest bank, acquired the Dutch operations of ABN AMRO, ... more In August 2007, Fortis Group, Belgium's largest bank, acquired the Dutch operations of ABN AMRO, becoming the fifth largest bank in Europe. Despite its size and its significant operations in the Benelux countries, Fortis struggled to integrate ABN AMRO. Fortis's situation worsened with the crash of the US subprime market, which impacted its subprime mortgage portfolio. By July 2008, Fortis's CEO had stepped down, its stock had lost 70% of its value, and it was on the verge of collapse due to a severe liquidity crisis. The governments of Belgium, Luxembourg, and the Netherlands quickly came together and agreed to inject funding into the bank to keep it afloat. However, the deal fell apart when the Netherlands reversed course and nationalized Fortis's Dutch assets. As a result, Fortis underwent an uncoordinated resolution, bifurcated along national lines. This case permits examination of this attempt at a cross-border rescue of a failing, systemically important financial institution, analysis of why the effort failed, and consideration of how it might proceed differently under current regulations.

Research paper thumbnail of The Rescue of Fannie Mae and Freddie Mac – Module D: Treasury’s GSE MBS Purchase Program

Yale Program on Financial Stability Research Paper Series, 2021

As the housing crisis escalated during the second half of 2007, two government-sponsored enterpri... more As the housing crisis escalated during the second half of 2007, two government-sponsored enterprises (GSEs), the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), occupied an increasingly central role in the secondary mortgage market, purchasing a greater percentage of new mortgages as private securitization rapidly contracted. As their importance in this market grew, the two GSEs also began to suffer billion-dollar losses, inciting concerns that they might not be able to stay solvent throughout the remainder of the crisis. On September 6, 2008, fearing the systemic consequences of the two firms’ failures, the GSEs’ new regulator, the Federal Housing Finance Agency (FHFA), took both entities into indefinite conservatorship as one step of a four-part rescue of the GSEs, which included the US Treasury’s establishment of a GSE mortgage-backed securities (MBS) purchase program (GSE MBS Program). This case examines the GSE MB...

Research paper thumbnail of The Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (AMLF) (U.S. GFC)

Monetary Economics: Financial System & Institutions eJournal, 2020

In mid-September 2008, following the bankruptcy of Lehman Brothers, money market mutual funds (MM... more In mid-September 2008, following the bankruptcy of Lehman Brothers, money market mutual funds (MMMFs) began to experience run-like redemption requests after a large fund “broke the buck,” owing to a large position in Lehman commercial paper (CP). Funds, which as a group were the largest investors in CP, retreated from CP, including asset-backed commercial paper (ABCP). Funds also sought to raise cash to meet redemptions by selling assets but were reluctant to sell ABCP into a depressed market. As the CP and ABCP markets seized up, it became difficult for issuers to place new paper, and concern grew about possible contagion of the broader financial markets and economy. As a result, on September 19, 2008, the Federal Reserve (the Fed) announced the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (AMLF), pursuant to which the Fed made discount window loans to depository institutions and broker dealers to purchase high-quality ABCP from eligible MMMFs, providin...

Research paper thumbnail of The Commercial Paper Funding Facility

SSRN Electronic Journal, 2009

ABSTRACT The commercial paper market experienced considerable strain in the weeks following the b... more ABSTRACT The commercial paper market experienced considerable strain in the weeks following the bankruptcy of Lehman Brothers on September 15, 2008, leading to liquidity pressures as investors such as money market mutual funds became increasingly reluctant to purchase commercial paper. As a result, the percentage of outstanding commercial paper that had to be refinanced each day rose rapidly during the Fall of 2008, interest rates on longer-term commercial paper increased significantly, and the volume of outstanding commercial paper declined sharply. A large share of outstanding commercial paper is issued or sponsored by financial intermediaries, and their difficulties placing commercial paper reduced their ability to meet the credit needs of businesses and households. The Commercial Paper Funding Facility (CPFF) provides a liquidity backstop to U.S. issuers of commercial paper through a special purpose vehicle (SPV) that purchases eligible three-month unsecured and asset-backed commercial paper from eligible issuers using financing provided by the Federal Reserve Bank of New York. The SPV holds the commercial paper until maturity and uses the proceeds from maturing commercial paper and other assets of the SPV to repay its loan from the New York Fed. The paper discusses design issues, as well as measures of evaluation of the facility.

Research paper thumbnail of The Money Market Investor Funding Facility (U.S. GFC)

Yale Program on Financial Stability Research Paper Series, 2020

In mid-September 2008, money market mutual funds (MMMFs) began to experience run-like redemption ... more In mid-September 2008, money market mutual funds (MMMFs) began to experience run-like redemption requests after the Reserve Primary Fund “broke the buck.” As a result, MMMFs became reluctant to roll over or invest in commercial paper (CP) and faced the prospect of selling asset-backed commercial paper (ABCP) they held into a declining market to raise cash. The money markets quickly became negatively impacted, and on October 21, 2008, the Fed announced the Money Market Investor Funding Facility (MMIFF), which would loan funds to a series of special purpose vehicles (SPVs) established by the private sector. The SPVs would use the funds (and proceeds from ABCP that they issued) to purchase eligible US dollar–denominated money market instruments (certificates of deposit, bank notes, and CP) from eligible money market investors, a group originally limited to MMMFs. The Fed authorized up to 540billionfortheMMIFF,whichwouldhavefacilitatedthepurchaseof540 billion for the MMIFF, which would have facilitated the purchase of 540billionfortheMMIFF,whichwouldhavefacilitatedthepurchaseof600 billion of assets. No...

Research paper thumbnail of Lessons Learned: Sarah Dahlgren

The Journal of Financial Crises, 2021

Research paper thumbnail of Cross-Border Resolution-Fortis Group

In August 2007, Fortis Group, Belgium’s largest bank, acquired the Dutch operations of ABN AMRO, ... more In August 2007, Fortis Group, Belgium’s largest bank, acquired the Dutch operations of ABN AMRO, becoming the fifth largest bank in Europe. Despite its size and its significant operations in the Benelux countries, Fortis struggled to integrate ABN AMRO. Fortis’s situation worsened with the crash of the US subprime market, which impacted its subprime mortgage portfolio. By July 2008, Fortis’s CEO had stepped down, its stock had lost 70% of its value, and it was on the verge of collapse due to a severe liquidity crisis. The governments of Belgium, Luxembourg, and the Netherlands quickly came together and agreed to inject funding into the bank to keep it afloat. However, the deal fell apart when the Netherlands reversed course and nationalized Fortis’s Dutch assets. As a result, Fortis underwent an uncoordinated resolution, bifurcated along national lines. This case permits examination of this attempt at a cross-border rescue of a failing systemically important financial institution, a...

Research paper thumbnail of The Lehman Brothers Bankruptcy A: Overview

The Journal of Financial Crises, 2019

On September 15, 2008, Lehman Brothers Holdings, Inc., the fourth-largest U.S. investment bank, s... more On September 15, 2008, Lehman Brothers Holdings, Inc., the fourth-largest U.S. investment bank, sought Chapter 11 protection, initiating the largest bankruptcy proceeding in U.S. history. The demise of the 164-year old firm was a seminal event in the global financial crisis. Under the direction of its long-time Chief Executive Officer Richard Fuld, Lehman had been very successful pursuing a high-leverage, high-risk business model that required it to daily raise billions of dollars to fund its operations. Beginning in 2006, Lehman began to invest aggressively in real-estate-related assets and soon had significant exposures to housing and subprime mortgages, just as these markets began to sour. Lehman employed a cadre of accountants and risk professionals to continually monitor its balance sheet, key ratios, and risks. It undertook desperate and questionable actions to stay alive. Nevertheless, Lehman ultimately failed because of an inability to finance itself. This overview case provides background information about Lehman's business and key personnel and also the economic _____________________________________________________________________ 1 This case study is one of eight Yale Program on Financial Stability (YPFS) case modules considering the Lehman Brothers Bankruptcy:

Research paper thumbnail of The Rescue of American International Group Module Z: Overview

The Journal of Financial Crises, 2021

In September 2008, in the midst of the broader financial crisis, the Federal Reserve Board of Gov... more In September 2008, in the midst of the broader financial crisis, the Federal Reserve Board of Governors used its emergency authority under Section 13(3) of the Federal Reserve Act to authorize the largest loan in its history, a 85billioncollateralizedcreditlinetoAmericanInternationalGroup(AIG),a85 billion collateralized credit line to American International Group (AIG), a 85billioncollateralizedcreditlinetoAmericanInternationalGroup(AIG),a1 trillion insurance and financial company that was experiencing severe liquidity strains. In connection with the loan, the government received an equity interest representing 79.9% of the company's ownership. AIG continued to experience a depressed stock price, asset devaluations, and the risk of ratings downgrades leading to questions about its solvency. To stabilize the company, the government committed additional assistance, including equity investments under the Troubled Assets Relief Program and asset purchases, for a total commitment of 182.3billion.AIGsurvivedasasmallerentityandrepaidallamountsowedtothegovernment,which,alongwiththegovernment′ssaleofitsAIGequitystake,resultedinaprofitof182.3 billion. AIG survived as a smaller entity and repaid all amounts owed to the government, which, along with the government's sale of its AIG equity stake, resulted in a profit of 182.3billion.AIGsurvivedasasmallerentityandrepaidallamountsowedtothegovernment,which,alongwiththegovernment′ssaleofitsAIGequitystake,resultedinaprofitof22.7 billion for the government and taxpayers (Treasury 2013, 14). In this case we discuss the government's actions on an aggregate basis and analyze how the rescue was conceived and executed in order to better understand the unique lessons to be learned and possibly applied to future crisis events. _____________________________________________________________________ 1 This is one on of seven YPFS case modules, all published in 2021, that consider the various elements of the government's rescue of American International Group. See page 5 for a complete list of the cases which are available from the Journal of Financial Crises at https://elischolar.library.yale.edu/journal-of-financial-crises/.

Research paper thumbnail of The Lehman Brothers Bankruptcy E: The Effects on Lehman’s U.S. Broker-Dealer

The Journal of Financial Crises, 2019

Lehman's U.S. broker-dealer, Lehman Brothers Inc. (LBI), was excluded from the parent company's b... more Lehman's U.S. broker-dealer, Lehman Brothers Inc. (LBI), was excluded from the parent company's bankruptcy filing on September 15, 2008, because it was thought that the solvent subsidiary might be able to wind down its affairs in a normal fashion. However, the force of the parent's demise proved too strong, and within days, LBI and dozens of Lehman subsidiaries around the world were also in liquidation. As a regulated broker-dealer, LBI was required to comply with the Securities and Exchange Commission financial-responsibility rules for broker-dealers, including maintaining customer assets separately. However, the corporate complexity and enterprise integration that characterized the Lehman group conflicted with this mandate. Omnibus cash accounts and wide-flung assets complicated the liquidation. It became clear in the course of the liquidation that the broker-dealer rules did not adequately address these issues or others raised by the infrastructure complexity and global reach of the companies to which they applied. This led some observers to question whether the rules should be revised and whether the broker-dealer should be excluded from all but minimal integration into the holding company's non-regulated businesses. _____________________________________________________________________ 1 References in this case study are hyperlinked to original sources wherever possible. This case study is one of eight Yale Program on Financial Stability (YPFS) case modules considering the Lehman Brothers Bankruptcy:

Research paper thumbnail of European Central Bank Tools and Policy Actions A: Open Market Operations, Collateral Expansion and Standing Facilities

The Journal of Financial Crises, 2019

Beginning in August 2007, the European Central Bank (ECB) used standard and nonstandard monetary ... more Beginning in August 2007, the European Central Bank (ECB) used standard and nonstandard monetary policies as the global financial markets progressed from initial turmoil to a widespread sovereign debt crisis. This case describes the key features of the ECB's asset purchase programs throughout the Global Financial Crisis and subsequent European sovereign debt crisis. These programs include the Covered Bond Purchase Programs (

Research paper thumbnail of European Central Bank Tools and Policy Actions B: Asset Purchase Programs

The Journal of Financial Crises, 2019

Beginning in August 2007, the European Central Bank (ECB) used standard and nonstandard monetary ... more Beginning in August 2007, the European Central Bank (ECB) used standard and nonstandard monetary policies as the global financial markets progressed from initial turmoil to a widespread sovereign debt crisis. This case describes the key features of the ECB's asset purchase programs throughout the Global Financial Crisis and subsequent European sovereign debt crisis. These programs include the Covered Bond Purchase Programs (

Research paper thumbnail of The Role of Ernst & Young

For many years prior to its demise, Lehman Brothers employed Ernst & Young (EY) as the firm’s... more For many years prior to its demise, Lehman Brothers employed Ernst & Young (EY) as the firm’s independent auditors to review its financial statements and express an opinion as to whether they fairly represented the company’s financial position. EY was supposed to try to detect fraud, determine whether a matter should be publicly disclosed, and communicate certain issues to Lehman’s Board audit committee. After Lehman filed for bankruptcy, it was discovered that the firm had employed questionable accounting with regard to an unorthodox financing transaction, Repo 105, which it used to make its results appear better than they were. EY was aware of Lehman’s use of Repo 105, and its failure to disclose its use. EY also knew that Lehman included in its liquidity pool assets that were impaired. When questioned, EY insisted that it had done nothing wrong. However, Anton R. Valukas, the Lehman bankruptcy examiner, concluded that EY had not fulfilled its duties and that probable claims existed against EY for malpractice. In this case, participants will consider the role and effectiveness of independent auditors in ensuring complete and accurate financial statements and related public disclosure.

Research paper thumbnail of The Effect on Lehman's U.S. Broker -Dealer

Research paper thumbnail of The Lehman Brothers Bankruptcy C: Managing the Balance Sheet Through the Use of Repo 105

Social Science Research Network, 2014

Anton R. Valukas, the Lehman Brothers court-appointed bankruptcy examiner, produced a 2,200-page ... more Anton R. Valukas, the Lehman Brothers court-appointed bankruptcy examiner, produced a 2,200-page report detailing possible claims that the estate might pursue, and he identified several, from company officers to its independent auditors. The most startling revelation of the report, however, was that, during its last year, Lehman had relied heavily on an unusual financing transaction-Repo 105. The examiner concluded that Lehman's aggressive use of Repo 105 transactions enabled it to remove up to $50 billion of assets from its balance sheet at quarter-end and to manipulate its leverage ratio so that it could report more favorable numbers. This case considers in-depth Lehman's questionable use of Repo 105 transactions and its impact.

Research paper thumbnail of European Central Bank Monetary Policy Operations During the Crisis A: Open Market Operations, Collateral Expansion and Standing Facilities

Social Science Research Network, 2015

Research paper thumbnail of Editors’ Note: Fighting the COVID-19 Pandemic Financial Crisis

Research paper thumbnail of Cross-Border Resolution—Dexia Group

In September 2008, Dexia Group, SA, the world’s largest provider of public finance, experienced a... more In September 2008, Dexia Group, SA, the world’s largest provider of public finance, experienced a sudden liquidity crisis. In response, the governments of Belgium, France, and Luxembourg provided the company a capital infusion and credit support. In February 2010, the company adopted a European Union (EU)-approved restructuring plan that required it to scale back its businesses and cease proprietary trading. In June 2011, Dexia withdrew from the governmentsponsored credit support program before its expiration date, and in July, the company announced that it had passed an EU stress test. However, just three months later, Dexia wrote down its substantial position in Greek debt and posted its largest loss ever. The company’s shares plummeted, and its Common Equity Tier 1 capital became negative. To avoid a disorderly resolution, the governments of Belgium, France, and Luxembourg nationalized Dexia’s assets. This case examines the attempted rescue of Dexia, provides an analysis of the successes and failures of that cross-border effort, and discusses the impact that Dexia’s holdings of sovereign debt had on the company’s viability and on the ability of its host countries to rescue it. 1 This module is one of four produced by the Yale Program on Financial Stability (YPFS), considering the European Banking Union. Other modules are: • European Banking Union A: The Single Supervisory Mechanism • European Banking Union B: The Single Resolution Mechanism • European Banking Union C: Cross-Border Resolution—Fortis Group 2 Project Editor, Case Study and Research, YPFS (Yale Program on Financial Stability), Yale School of Management. 3 Economist, Deutsche Bundesbank, Frankfurt/Main Financial Stability Department and Research Department. This coauthor’s contribution represents her personal opinions and do not necessarily reflect the views of the Deutsche Bundesbank or its staff. 4 Michael H. Jordan Professor of Finance and Management, and YPFS Program Director, Yale School of Management. _____________________________________________________________________

Research paper thumbnail of United States: Swaps to Mexico, 1994

Research paper thumbnail of Eurozone: Central Bank Swaps to Ireland and the United Kingdom, 2010

Research paper thumbnail of European Banking Union C: Cross-Border Resolution–Fortis Group

The Journal of Financial Crises, 2019

In August 2007, Fortis Group, Belgium's largest bank, acquired the Dutch operations of ABN AMRO, ... more In August 2007, Fortis Group, Belgium's largest bank, acquired the Dutch operations of ABN AMRO, becoming the fifth largest bank in Europe. Despite its size and its significant operations in the Benelux countries, Fortis struggled to integrate ABN AMRO. Fortis's situation worsened with the crash of the US subprime market, which impacted its subprime mortgage portfolio. By July 2008, Fortis's CEO had stepped down, its stock had lost 70% of its value, and it was on the verge of collapse due to a severe liquidity crisis. The governments of Belgium, Luxembourg, and the Netherlands quickly came together and agreed to inject funding into the bank to keep it afloat. However, the deal fell apart when the Netherlands reversed course and nationalized Fortis's Dutch assets. As a result, Fortis underwent an uncoordinated resolution, bifurcated along national lines. This case permits examination of this attempt at a cross-border rescue of a failing, systemically important financial institution, analysis of why the effort failed, and consideration of how it might proceed differently under current regulations.

Research paper thumbnail of The Rescue of Fannie Mae and Freddie Mac – Module D: Treasury’s GSE MBS Purchase Program

Yale Program on Financial Stability Research Paper Series, 2021

As the housing crisis escalated during the second half of 2007, two government-sponsored enterpri... more As the housing crisis escalated during the second half of 2007, two government-sponsored enterprises (GSEs), the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), occupied an increasingly central role in the secondary mortgage market, purchasing a greater percentage of new mortgages as private securitization rapidly contracted. As their importance in this market grew, the two GSEs also began to suffer billion-dollar losses, inciting concerns that they might not be able to stay solvent throughout the remainder of the crisis. On September 6, 2008, fearing the systemic consequences of the two firms’ failures, the GSEs’ new regulator, the Federal Housing Finance Agency (FHFA), took both entities into indefinite conservatorship as one step of a four-part rescue of the GSEs, which included the US Treasury’s establishment of a GSE mortgage-backed securities (MBS) purchase program (GSE MBS Program). This case examines the GSE MB...

Research paper thumbnail of The Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (AMLF) (U.S. GFC)

Monetary Economics: Financial System & Institutions eJournal, 2020

In mid-September 2008, following the bankruptcy of Lehman Brothers, money market mutual funds (MM... more In mid-September 2008, following the bankruptcy of Lehman Brothers, money market mutual funds (MMMFs) began to experience run-like redemption requests after a large fund “broke the buck,” owing to a large position in Lehman commercial paper (CP). Funds, which as a group were the largest investors in CP, retreated from CP, including asset-backed commercial paper (ABCP). Funds also sought to raise cash to meet redemptions by selling assets but were reluctant to sell ABCP into a depressed market. As the CP and ABCP markets seized up, it became difficult for issuers to place new paper, and concern grew about possible contagion of the broader financial markets and economy. As a result, on September 19, 2008, the Federal Reserve (the Fed) announced the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (AMLF), pursuant to which the Fed made discount window loans to depository institutions and broker dealers to purchase high-quality ABCP from eligible MMMFs, providin...

Research paper thumbnail of The Commercial Paper Funding Facility

SSRN Electronic Journal, 2009

ABSTRACT The commercial paper market experienced considerable strain in the weeks following the b... more ABSTRACT The commercial paper market experienced considerable strain in the weeks following the bankruptcy of Lehman Brothers on September 15, 2008, leading to liquidity pressures as investors such as money market mutual funds became increasingly reluctant to purchase commercial paper. As a result, the percentage of outstanding commercial paper that had to be refinanced each day rose rapidly during the Fall of 2008, interest rates on longer-term commercial paper increased significantly, and the volume of outstanding commercial paper declined sharply. A large share of outstanding commercial paper is issued or sponsored by financial intermediaries, and their difficulties placing commercial paper reduced their ability to meet the credit needs of businesses and households. The Commercial Paper Funding Facility (CPFF) provides a liquidity backstop to U.S. issuers of commercial paper through a special purpose vehicle (SPV) that purchases eligible three-month unsecured and asset-backed commercial paper from eligible issuers using financing provided by the Federal Reserve Bank of New York. The SPV holds the commercial paper until maturity and uses the proceeds from maturing commercial paper and other assets of the SPV to repay its loan from the New York Fed. The paper discusses design issues, as well as measures of evaluation of the facility.

Research paper thumbnail of The Money Market Investor Funding Facility (U.S. GFC)

Yale Program on Financial Stability Research Paper Series, 2020

In mid-September 2008, money market mutual funds (MMMFs) began to experience run-like redemption ... more In mid-September 2008, money market mutual funds (MMMFs) began to experience run-like redemption requests after the Reserve Primary Fund “broke the buck.” As a result, MMMFs became reluctant to roll over or invest in commercial paper (CP) and faced the prospect of selling asset-backed commercial paper (ABCP) they held into a declining market to raise cash. The money markets quickly became negatively impacted, and on October 21, 2008, the Fed announced the Money Market Investor Funding Facility (MMIFF), which would loan funds to a series of special purpose vehicles (SPVs) established by the private sector. The SPVs would use the funds (and proceeds from ABCP that they issued) to purchase eligible US dollar–denominated money market instruments (certificates of deposit, bank notes, and CP) from eligible money market investors, a group originally limited to MMMFs. The Fed authorized up to 540billionfortheMMIFF,whichwouldhavefacilitatedthepurchaseof540 billion for the MMIFF, which would have facilitated the purchase of 540billionfortheMMIFF,whichwouldhavefacilitatedthepurchaseof600 billion of assets. No...

Research paper thumbnail of Lessons Learned: Sarah Dahlgren

The Journal of Financial Crises, 2021

Research paper thumbnail of Cross-Border Resolution-Fortis Group

In August 2007, Fortis Group, Belgium’s largest bank, acquired the Dutch operations of ABN AMRO, ... more In August 2007, Fortis Group, Belgium’s largest bank, acquired the Dutch operations of ABN AMRO, becoming the fifth largest bank in Europe. Despite its size and its significant operations in the Benelux countries, Fortis struggled to integrate ABN AMRO. Fortis’s situation worsened with the crash of the US subprime market, which impacted its subprime mortgage portfolio. By July 2008, Fortis’s CEO had stepped down, its stock had lost 70% of its value, and it was on the verge of collapse due to a severe liquidity crisis. The governments of Belgium, Luxembourg, and the Netherlands quickly came together and agreed to inject funding into the bank to keep it afloat. However, the deal fell apart when the Netherlands reversed course and nationalized Fortis’s Dutch assets. As a result, Fortis underwent an uncoordinated resolution, bifurcated along national lines. This case permits examination of this attempt at a cross-border rescue of a failing systemically important financial institution, a...