The New Lombard Street: How the Fed Became the Dealer of Last Resort available in Hardcover, eBook
The New Lombard Street: How the Fed Became the Dealer of Last Resort
- ISBN-10:
- 0691143986
- ISBN-13:
- 9780691143989
- Pub. Date:
- 11/28/2010
- Publisher:
- Princeton University Press
- ISBN-10:
- 0691143986
- ISBN-13:
- 9780691143989
- Pub. Date:
- 11/28/2010
- Publisher:
- Princeton University Press
The New Lombard Street: How the Fed Became the Dealer of Last Resort
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Overview
Walter Bagehot's Lombard Street, published in 1873 in the wake of a devastating London bank collapse, explained in clear and straightforward terms why central banks must serve as the lender of last resort to ensure liquidity in a faltering credit system. Bagehot's book set down the principles that helped define the role of modern central banks, particularly in times of crisis—but the recent global financial meltdown has posed unforeseen challenges. The New Lombard Street lays out the innovative principles needed to address the instability of today's markets and to rebuild our financial system.
Revealing how we arrived at the current crisis, Perry Mehrling traces the evolution of ideas and institutions in the American banking system since the establishment of the Federal Reserve in 1913. He explains how the Fed took classic central banking wisdom from Britain and Europe and adapted it to America's unique and considerably more volatile financial conditions. Mehrling demonstrates how the Fed increasingly found itself serving as the dealer of last resort to ensure the liquidity of securities markets—most dramatically amid the recent financial crisis. Now, as fallout from the crisis forces the Fed to adapt in unprecedented ways, new principles are needed to guide it. In The New Lombard Street, Mehrling persuasively argues for a return to the classic central bankers' "money view," which looks to the money market to assess risk and restore faith in our financial system.
Product Details
| ISBN-13: | 9780691143989 |
|---|---|
| Publisher: | Princeton University Press |
| Publication date: | 11/28/2010 |
| Pages: | 192 |
| Product dimensions: | 5.60(w) x 8.50(h) x 0.90(d) |
About the Author
Table of Contents
Acknowledgments xi
Introduction 1 A Money View Perspective 2
Lessons from the Crisis 6
Chapter One: Lombard Street, Old and New 11
The Inherent Instability of Credit 12
The Old Lombard Street 18
The New Lombard Street 23
Chapter Two: Origins of the Present System 30
From National Banking to the Fed 30
From War Finance to Catastrophe 37
Noncommercial Credit in Depression and War 43
Chapter Three: The Age of Management 48
Monetary Policy and the Employment Act 52
Listening to the Academics 57
Monetary Walrasianism 60
A Dissenting View 65
Chapter Four: The Art of the Swap 71
Currency Swaps and the UIP Norm 72
Brave New World 79
From Modern Finance to Modern Macroeconomics 85
Chapter Five: What Do Dealers Do? 92
Inside the Money Market 93
Funding Liquidity and Market Liquidity 98
Anatomy of a Crisis 103
Monetary Policy 107
Chapter Six: Learning from the Crisis 113
The Long Shadow of Jimmy Stewart 116
A Stress Test of Moulton-Martin 123
Dealer of Last Resort 132
Conclusion 136
Notes 141
References 149
Index 159
What People are Saying About This
This is a wonderful book that offers a fresh understanding of the role of the central bank in the world of modern finance.
— Roger E. Backhouse, University of Birmingham
Informed by history, a model of clear thought and lucid prose, The New Lombard Street is by far our best guidebook to the changed structure of financial markets and the new role of the Federal Reserve. It also charts a new path for monetary policymakers and—given the scale of the crisis—not a minute too soon.
— James K. Galbraith, author of "The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too"
The New Lombard Street makes a serious and successful effort to deepen our understanding not just of the last century or more of U.S. monetary history, but also of the way in which economic analysis has evolved alongside that history. I very much enjoyed reading this book. It is timely, provocative, and well written.
— David Laidler, professor emeritus, University of Western Ontario
The global financial system is badly broken. Many institutions and individuals share responsibility for the development of pathologies in and around our largest banks, but the buck stops, literally and figuratively, with the Federal Reserve. If you would like to understand how this happened—and how we (and the Fed) might inch back from the precipice—read this book.
— Simon Johnson, coauthor of "13 Bankers: The Wall Street Takeover and the Next Financial Meltdown"
No one else has come close to the achievement of this book in relating the crisis to the prior history of monetary thought and central bank practice. A masterful, original, and beautifully constructed work.
— Charles A. E. Goodhart, London School of Economics and Political Science
"The global financial system is badly broken. Many institutions and individuals share responsibility for the development of pathologies in and around our largest banks, but the buck stops, literally and figuratively, with the Federal Reserve. If you would like to understand how this happened—and how we (and the Fed) might inch back from the precipice—read this book."—Simon Johnson, coauthor of 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown"Informed by history, a model of clear thought and lucid prose, The New Lombard Street is by far our best guidebook to the changed structure of financial markets and the new role of the Federal Reserve. It also charts a new path for monetary policymakers and—given the scale of the crisis—not a minute too soon."—James K. Galbraith, author of The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too"In Lombard Street, Walter Bagehot laid out the financial market lore and central banking wisdom of his day—the 1870s. Today's markets are different, and so is what constitutes useful policy. In The New Lombard Street, Perry Mehrling blends his rich historical knowledge with an acute analysis of current-day markets to suggest what constitutes sound central banking and financial regulation for our time. The result merits close attention from policymakers, and the rest of us too."—Benjamin M. Friedman, author of The Moral Consequences of Economic Growth"No one else has come close to the achievement of this book in relating the crisis to the prior history of monetary thought and central bank practice. A masterful, original, and beautifully constructed work."—Charles A. E. Goodhart, London School of Economics and Political Science"The New Lombard Street makes a serious and successful effort to deepen our understanding not just of the last century or more of U.S. monetary history, but also of the way in which economic analysis has evolved alongside that history. I very much enjoyed reading this book. It is timely, provocative, and well written."—David Laidler, professor emeritus, University of Western Ontario"This is a wonderful book that offers a fresh understanding of the role of the central bank in the world of modern finance."—Roger E. Backhouse, University of Birmingham
No one else has come close to the achievement of this book in relating the crisis to the prior history of monetary thought and central bank practice. A masterful, original, and beautifully constructed work.
— Charles A. E. Goodhart, London School of Economics and Political Science
In Lombard Street, Walter Bagehot laid out the financial market lore and central banking wisdom of his day—the 1870s. Today's markets are different, and so is what constitutes useful policy. In The New Lombard Street, Perry Mehrling blends his rich historical knowledge with an acute analysis of current-day markets to suggest what constitutes sound central banking and financial regulation for our time. The result merits close attention from policymakers, and the rest of us too.
— Benjamin M. Friedman, author of "The Moral Consequences of Economic Growth"