In the attachment
Purpose of the paper: This paper is designed to allow students to go into greater depth about a topic related to the course. The paper is also meant to allow students to read some of the relevant literature related to their topic, and to deepen students’ familiarity with the professional literature in economics and finance. Finally, the paper gives students an opportunity to formulate their own perspectives on important issues.
Length and use of sources. Papers should be 8-10 pages long, in 12 point type with 1.5 line spaces, and must include a bibliography using no less than 3 sources. These sources should be economics journal articles, and scholarly books. Other sources, such as news magazines and newspapers, will not be counted towards the 3 source requirement. Wikipedia may be used for background information, but may not be included among the 3 sources.
Citation style: All quotations, and all significant ideas or facts taken from your sources, must be acknowledged. You may use an abbreviated style. For example, if you are citing Jared Diamond’s Guns, Germs and Steel, published in 1999, you may write (Diamond 1999, p. 3) in the text, and then include the full citation in a bibliography at the end of the text.
I do not insist on a particular citation style, as long as you use one style consistently and carefully cite sources used. MLA, Chicago and any other recognized style may be used.
Topics: Below are some suggested topics. Other topics may be covered with the approval of the instructor.
1. Should big banks be broken up? You may use the Intelligence Squared debate
http://www.intelligencesquaredus.org/debates/past
-… as a source, and/or examine the proposed Brown-Vitter Act in the US, or use other sources such as Simon Johnson’s Thirteen Bankers.
2. Should the big banks be broken up, British style:Examine the recommendations of the UK Vickers Commission and the “ring-fence” approach adopted to partially separate commercial and investment banks in the UK. Compare the UK solutions to the US Volcker Rule and Glass-Steagall Act. Based on your analysis and the experiences of each country since the Financial Crisis, what are the strengths and weaknesses of the UK approach as opposed to the US approach?
3. What was the role of the Government Sponsored Enterprises (Fannie Mae and Freddie Mac) in the financial crisis? What should be done with these enterprises? How will these changes affect the housing finance market and the economy as a whole?
4. Dodd-Frank: is it too weak, too strong or just right? You may look at the Dodd-Frank bill, Basel III or legislation from other countries. You may focus on specific provisions of the legislation. In considering how appropriate the Act is, look at the modifications to Act passed by Congress in 2018.
5. The Volcker Rule: Detailed regulations implementing the Volcker Rule were adopted in December 2013. Discuss what it tries to do, how it might be implemented, and whether it well help solve the issues of bank risk-taking. You may consider the case of JP Morgan’s losses on investments in London (“the London Whale”) during 2012.
6. Mortgage modifications: examine the controversy about whether securitization made it more difficult for homeowners to modify their mortgages, and consider efforts by the Bush and Obama administrations to promote mortgage modifications. Why were so few mortgages modified? Is modification in the interest of mortgage lenders?
7. Resolving troubled institutions: examine the experience of the FDIC under the Federal Deposit Insurance Corporation Act of 1991, the work of the Resolution Trust Corporation, and/or the provisions of the Dodd-Frank bill. Useful source: Sheila Bair, Bull by the Horns.
8. Bank failure case studies: There are very interesting books and articles written about key failures and problems such as those of Lehman Brothers, AIG, Washington Mutual, and Citibank. Choose one or more case and examine the causes of the failure, how well the supervisors and US Government responded, and how these experiences have led to changes in the laws and regulations.
9. Crisis case studies: case studies of two countries affected by major crises, such as countries involved in the 1995 “Tequila Crisis”, the 1997 Asian Crisis, or the collapse of Argentina’s currency board in 2001. One good way to structure case studies is to look at triggering events, deeper causes (was the crisis a result of a lending boom, an overvalued exchange rate, high foreign debt, macroeconomic instability, poor financial regulation), the extent of the crisis (fall in GDP, losses in the banking system, changes in the exchange rate)¸and how the crisis was resolved.
10. Financial crisis, British-style: examine the UK’s experience with bank nationalization, the changes to bank resolution policy (the Special Resolution Regime) and the recovery or lack of it.
11. Financial crisis, Irish or Spanish-style: examine the housing boom and subsequent banking crisis in Ireland or Spain, the governments’ response to the crisis, the state of the Irish banking system and housing market today, and the role of European Union help.
12. Financial crisis, Japanese-style: examine the Japanese government’s response to the crisis and Japan’s struggle with deflation and another banking crisis.
13. Lender of last resort: did the provision of unlimited liquidity by central banks in 2007 and 2008 alleviate the crisis or did it provide loans to insolvent institutions? Examine Taylor’s “Black Swan” hypothesis vs. more positive assessments.
14. Unconventional monetary policy, Japanese-style: how did Japan respond to deflation? Were the policy measures effective? What is to be learned from the Japanese experience?
15. Unconventional monetary policy, US-style: Examine the Fed’s Large-Scale Asset Programs. Did they help the economy? What are the challenges and dangers of returning to conventional monetary policy? How did the Fed use unconventional monetary policy to deal with the financial and economic stresses of the COVID 19 crisis?
16. Unconventional monetary policy, European-style: Why was the European Central Bank slower to adopt unconventional policies than the Fed, Bank of England, or Bank of Japan? Discuss the policies taken under Governor Draghi. How successful have these policies been?
17. Unconventional monetary policy, other European versions: Examine the experience of the Swiss National Bank, Bank of England, Swedish Riksbank or Danish Central Bank (choose one or more than one!)
18. Macroprudential policies: what policies other than monetary policy and traditional banking supervision can be used to keep financial systems stable? Examine some of the policies that have been proposed, such as Contingent Capital, Mandatory Subordinated Debt, Leverage limits and Loan to Value regulations.
19. The new financial stability bodies: compare the powers, composition and potential effectiveness of the US Financial Services Oversight Council and the EU European Systemic Risk Board.
20. The European debt crisis: examine the causes of the crisis, and indicate the relative importance of fiscal issues, banking sector issues, and governance issues in the Eurozone and European Union. You may compare the problems facing two or more of the countries most involved, including Greece, Portugal, Ireland, Spain, Italy or Cyprus.
21. The debate over bank supervision in the European Union: examine the EU’s decision to give banking supervision tasks to the European Central Bank. Would this improve financial stability in the European Union? Would it help solve the fiscal crisis? Who is currently responsible for dealing with failures of banks that operate in more than one European country? What were the failings of the previous arrangements? Do the new arrangements, including the Single Supervisory Mechanism, seem likely to fix these problems?
22. Inflation targeting: evaluate inflation targeting as a central bank strategy, looking at both issues of macroeconomic stability and issues of financial stability. Alternatively, analyze the experience of two countries using inflation targeting and two countries using a different monetary regime.
23. Proposals for dramatically higher capital requirements for banks: read and discuss the proposals of Admati and Hellwig in their book The Bankers New Clothes or their articles, and discuss arguments made for and against by the banking industry and other analysts.
24. Development of financial instruments to prevent another subprime crisis: read Robert Schiller’s Subprime Solution and discuss his proposals for new types of mortgages that would lower the risk of default and the impact of recessions on homeowners.
25. Asset prices, credit booms and bubbles: read Robert Schiller’s Irrational Exuberance and discuss what could have been done to deal with the real estate bubble that led to the Financial Crisis.
26. The Role of Credit Rating Agencies in the Crisis: Rating agencies were accused of grossly underestimating the riskiness of complex securities, as well as other oversights. Evaluate their role in the crisis as well as the changes in how CRAs are monitored under the Dodd-Frank Act.
27. The Monetary Policy Response to COVID: Examine the ways that the Federal Reserve responded to the COVID crisis, including changes to the Federal Funds Rate, Bond Purchases, and special lending facilities. Did the Fed respond fast enough and strongly enough? Is there more the Fed can do? What are the limits to the Fed’s ability to help the economy in the crisis?
28. The UK’s “Special Resolution Regime”: After 2008, the UK drastically changed the way it handles bank failures. Discuss how the Special Resolution Regime resembles the powers given to the FDIC and the United States. Do you see advantages for the UK’s system as opposed to the US’s system?
29. Race and Subprime mortgage lending: The Subprime lending industry was welcomed by some for providing new opportunities for homeownership to Black and minority families. But after the Financial Crisis, a very large proportion of Black and minority borrowers lost their homes and much of their wealth. Was this industry predatory in a racially-biased manner? Have the reforms instituted since the crisis adequately protected Blacks and other minority borrowers from discrimination?
30. Algorithms and financial markets: Some authors have claimed that efforts to make financial decisions such as loan approval based on big data and algorithmic decision-making have hidden biases and dangers. Read Cathy O’Neil’s Weapons of Math Destruction and other sources to evaluate this idea.
