Fragile by Design: The Political Origins of Banking Crises and Scarce Credit (The Princeton Economic History of the Western World) - Hardcover

Buch 20 von 55: The Princeton Economic History of the Western World

Calomiris, Charles W.; Haber, Stephen H.

 
9780691155241: Fragile by Design: The Political Origins of Banking Crises and Scarce Credit (The Princeton Economic History of the Western World)
Hardcover
ISBN 10: 0691155240 ISBN 13: 9780691155241
Verlag: Princeton Univers. Press, 2014

Inhaltsangabe

Why stable banking systems are so rare

Why are banking systems unstable in so many countries—but not in others? The United States has had twelve systemic banking crises since 1840, while Canada has had none. The banking systems of Mexico and Brazil have not only been crisis prone but have provided miniscule amounts of credit to business enterprises and households.

Analyzing the political and banking history of the United Kingdom, the United States, Canada, Mexico, and Brazil through several centuries, Fragile by Design demonstrates that chronic banking crises and scarce credit are not accidents. Calomiris and Haber combine political history and economics to examine how coalitions of politicians, bankers, and other interest groups form, why they endure, and how they generate policies that determine who gets to be a banker, who has access to credit, and who pays for bank bailouts and rescues.

Fragile by Design is a revealing exploration of the ways that politics inevitably intrudes into bank regulation.

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Über die Autorin bzw. den Autor

Charles W. Calomiris is a professor at Columbia Business School and Columbia's School of International and Public Affairs. Stephen H. Haber is a professor of political science and senior fellow of the Hoover Institution at Stanford University.

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"A seminal political economy analysis of why banking varies so much across countries, with such profound consequences for economic development and social welfare. Not just fascinating and original, but also right."--James Robinson, author ofWhy Nations Fail

"A monumental intellectual and scholarly achievement that will shape thinking on finance and politics for decades to come. A book for the ages, whose insights are delivered in a lively, punchy, and nontechnical narrative."--Ross Levine, University of California, Berkeley

"A major contribution to our understanding of banking, showing why nations need banks, why banks need the state, and how the quality of banking depends on how the 'Game of Bank Bargains' is played between politicians, bankers, and a penumbra of key protagonists."--Charles Goodhart, London School of Economics and Political Science

"What explains the dramatic variation across countries in the extent, structure, regulation, and fragility of banking? Calomiris and Haber provide a tour de force resolution of the question. Their answer: politics.Fragile by Design's synthesis is shockingly original and convincing."--Darrell Duffie, Stanford University

"A remarkably detailed account of the sources of banking and financial failure under different institutional rules. A masterful achievement and a must-read for banking scholars, analysts, and regulators."--Allan Meltzer, author ofA History of the Federal Reserve

"Fragile by Design bristles with insights about how conflicting private interests, intermediated through political institutions, have sometimes produced banking and social insurance arrangements that make financial crises much more likely than they should be."--Thomas Sargent, Nobel Laureate in Economics

"Why do America's banks go bust so often? Fragile by Design draws back the veil that hides the murky world where politics and big money meet, and exposes the surprising truth--that the banks were built to fail. Read, learn, and keep your cash close at hand!"--Ian Morris, author of Why the West Rules--for Now

"Fragile by Design explains why the U.S. banking crisis of 2007–2009 is no aberration, but only the latest episode of a populist bargain gone awry. This is a powerful entry in the debate on how to fix the postcrisis world."--Raghuram Rajan, author of Fault Lines

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"A seminal political economy analysis of why banking varies so much across countries, with such profound consequences for economic development and social welfare. Not just fascinating and original, but also right."--James Robinson, author ofWhy Nations Fail

"A monumental intellectual and scholarly achievement that will shape thinking on finance and politics for decades to come. A book for the ages, whose insights are delivered in a lively, punchy, and nontechnical narrative."--Ross Levine, University of California, Berkeley

"A major contribution to our understanding of banking, showing why nations need banks, why banks need the state, and how the quality of banking depends on how the 'Game of Bank Bargains' is played between politicians, bankers, and a penumbra of key protagonists."--Charles Goodhart, London School of Economics and Political Science

"What explains the dramatic variation across countries in the extent, structure, regulation, and fragility of banking? Calomiris and Haber provide a tour de force resolution of the question. Their answer: politics.Fragile by Design's synthesis is shockingly original and convincing."--Darrell Duffie, Stanford University

"A remarkably detailed account of the sources of banking and financial failure under different institutional rules. A masterful achievement and a must-read for banking scholars, analysts, and regulators."--Allan Meltzer, author ofA History of the Federal Reserve

"Fragile by Design bristles with insights about how conflicting private interests, intermediated through political institutions, have sometimes produced banking and social insurance arrangements that make financial crises much more likely than they should be."--Thomas Sargent, Nobel Laureate in Economics

"Why do America's banks go bust so often? Fragile by Design draws back the veil that hides the murky world where politics and big money meet, and exposes the surprising truth--that the banks were built to fail. Read, learn, and keep your cash close at hand!"--Ian Morris, author of Why the West Rules--for Now

"Fragile by Design explains why the U.S. banking crisis of 2007 2009 is no aberration, but only the latest episode of a populist bargain gone awry. This is a powerful entry in the debate on how to fix the postcrisis world."--Raghuram Rajan, author of Fault Lines

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FRAGILE BY DESIGN

The Political Origins of Banking Crises and Scarce Credit

By CHARLES W. CALOMIRIS, STEPHEN H. HABER

PRINCETON UNIVERSITY PRESS

Copyright © 2014 Princeton University Press
All rights reserved.
ISBN: 978-0-691-15524-1

Contents

PREFACE....................................................................ix
SECTION ONE No Banks without States, and No States without Banks..........
1 If Stable and Efficient Banks Are Such a Good Idea, Why Are They So 
Rare?......................................................................		3
2 The Game of Bank Bargains................................................27
3 Tools of Conquest and Survival: Why States Need Banks....................60
4 Privileges with Burdens: War, Empire, and the Monopoly Structure of 
English Banking............................................................		84
5 Banks and Democracy: Britain in the Nineteenth and Twentieth Centuries...105
SECTION TWO The Cost of Banker-Populist Alliances: The United States 
versus Canada..............................................................
6 Crippled by Populism: U.S. Banking from Colonial Times to 1990...........153
7 The New U.S. Bank Bargain: Megabanks, Urban Activists, and the Erosion 
of Mortgage Standards......................................................		203
8 Leverage, Regulatory Failure, and the Subprime Crisis....................256
9 Durable Partners: Politics and Banking in Canada.........................283
SECTION THREE Authoritarianism, Democratic Transitions, and the Game of 
Bank Bargains..............................................................
10 Mexico: Chaos Makes Cronyism Look Good..................................331
11 When Autocracy Fails: Banking and Politics in Mexico since 1982.........366
12 Inflation Machines: Banking and State Finance in Imperial Brazil........390
13 The Democratic Consequences of Inflation-Tax Banking in Brazil..........415
SECTION FOUR Going beyond Structural Narratives...........................
14 Traveling to Other Places: Is Our Sample Representative?................451
15 Reality Is a Plague on Many Houses......................................479
REFERENCES.................................................................507
INDEX......................................................................549


CHAPTER 1

If Stable and Efficient Banks Are Such a Good Idea,Why Are They So Rare?

The majority of economists ... tend to assume that financial institutionswill grow more or less spontaneously as the need for their servicesarises—a case of demand creating its own supply.... Such an attitudedisposes of a complex matter far too summarily.

Rondo Cameron and Hugh Patrick,Banking in the Early Stages of Industrialization (1967)


Everyone knows that life isn't fair, that "politics matters." We say itwhen our favorite movie loses out at the Academy Awards. We sayit when the dolt in the cubicle down the hall, who plays golf with theboss, gets the promotion we deserved. We say it when bridges to nowhereare built because a powerful senator brings federal infrastructure dollarsto his home state. And we say it when well-connected entrepreneurs obtainbillions in government subsidies to build factories that never stand achance of becoming competitive enterprises.

We recognize that politics is everywhere, but somehow we believe thatbanking crises are apolitical, the result of unforeseen and extraordinarycircumstances, like earthquakes and hailstorms. We believe this because itis the version of events told time and again by central bankers and treasuryofficials, which is then repeated by business journalists and television talkingheads. In that story, well-intentioned and highly skilled people do thebest they can to create effective financial institutions, allocate credit efficiently,and manage problems as they arise—but they are not omnipotent.Unable to foresee every possible contingency, they are sometimes subjectedto strings of bad luck. "Economic shocks," which presumably could notpossibly have been anticipated, destabilize an otherwise smoothly runningsystem. Banking crises, according to this version of events, are much likeTolstoy's unhappy families: they are all unhappy in their own ways.

This book takes exception with that view and suggests instead that thepolitics that we see operating everywhere else around us also determineswhether societies suffer repeated banking crises (as in Argentina and theUnited States), or never suffer banking crises (as in Canada). By politicswe do not mean temporary, idiosyncratic alliances among individuals ofthe type that get the dumbest guy in the company promoted to vice presidentfor corporate strategy. We mean, instead, the way that the fundamentalpolitical institutions of a society structure the incentives of politicians,bankers, bank shareholders, depositors, debtors, and taxpayers to formcoalitions in order to shape laws, policies, and regulations in their favor—oftenat the expense of everyone else. In this view, a country does not"choose" its banking system: rather it gets a banking system that is consistentwith the institutions that govern its distribution of political power.


The Nonrandom Distribution of Banking Crises

Systemic bank insolvency crises like the U.S. subprime debacle of 2007–09—a series of bank failures so catastrophic that the continued existence ofthe banking system itself is in doubt—do not happen without warning,like earthquakes or mountain lion attacks. Rather, they occur when bankingsystems are made vulnerable by construction, as the result of politicalchoices. Banking systems are susceptible to collapse only when banksboth expose themselves to high risk in making loans and other investmentsand have inadequate capital on their balance sheets to absorb thelosses associated with those risky loans and investments. If a bank makesonly solid loans to solid borrowers, there is little chance that its loan portfoliowill suddenly become nonperforming. If a bank makes riskier loansto less solid borrowers but sets aside capital to cover the possibility thatthose loans will not be repaid, its shareholders will suffer a loss, but it willnot become insolvent. These basic facts about banking crises are knownto bankers or government regulators; they are as old as black thread.

By contrast, consider what occurs when bank capital is insufficient relativeto bank risk. Bank losses can become so large that the negative networth of banks totals a significant fraction of a country's gross domesticproduct (GDP). In this scenario, credit contracts, GDP falls, and the countrysustains a recession driven by a banking crisis. Governments can preventthis outcome by propping up the banking system. They can makeloans to the banks, purchase their nonperforming assets, buy their sharesin order to provide them with adequate capital, or take them over entirely.

If such catastrophes were random events, all countries would sufferthem with equal frequency. The fact...

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Verlag
Princeton Univers. Press
Erscheinungsdatum
2014
Sprache
Englisch
ISBN 10 
0691155240
ISBN 13 
9780691155241
Einband
Gebundene Ausgabe
Anzahl der Seiten
570
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