Holistic Regulation

“We must have a strategy that regulates the financial system as a whole, in a holistic way, not just its individual components.” Ben S. Bernanke, “Financial Reform to Address Systemic Risk” at the Council on Foreign Relations, Washington, D.C., March 10, 2009   In a 2010 short paper, Brunnermeier, Hansen, Kashyap, Krishnamurthy and Lo (2010)…

“Say it ain’t so, Ben”

Bank of America shareholders approved the purchase of Merrill Lynch on December 5, 2008.   Last year in the fourth quarter,  Merrill Lynch lost $15.84 billion.   Bank of America President Ken Lewis knew that Merrill was at risk of huge 4th quarter losses. Ken Lewis did not tell shareholders about Merrill’s impending large losses.  Why? Under oath,…