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Puts in the Shadow

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  • Mr. Manmohan Singh

Abstract

In the aftermath of the Lehman crisis, payouts (i.e., taxpayer bailouts) in various forms were provided by governments to a variety of financial institutions and markets that were outside the regulatory perimeter - the "shadow" banking system. Although recent regulatory proposals attempt to reduce these "puts", we provide examples from non-banking activities within a bank, money market funds, Triparty repo, OTC derivatives market, collateral with central banks, and issuance of floating rate notes etc., that these risks remain. We suggest that a regulatory environment where puts are not ambiguous will likely lower the cost of bail-outs after a crisis.

Suggested Citation

  • Mr. Manmohan Singh, 2012. "Puts in the Shadow," IMF Working Papers 2012/229, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2012/229
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    References listed on IDEAS

    as
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    4. Patrick E. McCabe & Marco Cipriani & Michael Holscher & Antoine Martin, 2013. "The Minimum Balance at Risk: A Proposal to Mitigate the Systemic Risks Posed by Money Market Funds," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 44(1 (Spring), pages 211-278.
    5. Darrell Duffie & David A. Skeel, 2012. "A Dialogue on the Costs and Benefits of Automatic Stays for Derivatives and Repurchase Agreements," Book Chapters, in: Kenneth E. Scott & John B. Taylor (ed.), Bankruptcy Not Bailout, chapter 5, Hoover Institution, Stanford University.
    6. Perry Mehrling, 2010. "The New Lombard Street: How the Fed Became the Dealer of Last Resort," Economics Books, Princeton University Press, edition 1, number 9298.
    7. Kimberly Ann Summe, 2012. "An Examination of Lehman Brothers' Derivatives Portfolio Postbankruptcy - Would Dodd-Frank Have Made a Difference?," Book Chapters, in: Kenneth E. Scott & John B. Taylor (ed.), Bankruptcy Not Bailout, chapter 4, Hoover Institution, Stanford University.
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    Cited by:

    1. Mr. Itai Agur & Mr. Sunil Sharma, 2013. "Rules, Discretion, and Macro-Prudential Policy," IMF Working Papers 2013/065, International Monetary Fund.
    2. Maurizio Trapanese, 2021. "The economics of non-bank financial intermediation: why do we need to fill the regulation gap?," Questioni di Economia e Finanza (Occasional Papers) 625, Bank of Italy, Economic Research and International Relations Area.
    3. Mr. Stijn Claessens & Mr. Lev Ratnovski, 2014. "What is Shadow Banking?," IMF Working Papers 2014/025, International Monetary Fund.

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