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The New Lombard Street : How the Fed Became the Dealer of Last Resort - Perry Mehrling

The New Lombard Street

How the Fed Became the Dealer of Last Resort

Hardcover Published: 28th November 2010
ISBN: 9780691143989
Number Of Pages: 192

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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.

"A well-written, scholarly dissection that should be required reading for all graduate courses (and perhaps some advanced undergraduate) in macroeconomics or monetary economics."--Choice "With lucid precision, Mehrling traces the history of how Fed policy makers became biased toward 'excessive elasticity'... Mehrling saves the best for the end, where he describes the Fed's battle to save the system with an alphabet soup of lending programs."--James Pressley, Bloomberg News "I continue to ponder Mehrling's main claims, but in any case this is an important book about the new Fed."--Tyler Cowen, Marginal Revolution "In The New Lombard Street, Perry Mehrling ... provides a lucid account of how the system worked when it was working--and of the growing role assumed by the Fed in an era of global economic volatility and 'credit-fueled bubbles.'"--Glenn C. Altschuler, Tulsa World "[A] fantastic book."--Rortybomb, Mike Konczal blog "[I]mportant... Mehrling's new book tries to do just what Bagehot did: to give an account both of how and why the Fed acted when it reinvented the rules in the middle of a financial crisis, and of what the implications for future monetary policy will be."--Harold James, Central Banking Journal "This is an excellent and accessible analysis for anyone wishing to understand the origins of the financial crisis and how the Fed came to respond as it did."--Larry Hatheway, Business Economist

Acknowledgmentsp. xi
Introductionp. 1
A Money View Perspectivep. 2
Lessons from the Crisisp. 6
Lombard Street, Old and Newp. 11
The Inherent Instability of Creditp. 12
The Old Lombard Streetp. 18
The New Lombard Streetp. 23
Origins of the Present Systemp. 30
From National Banking to the Fedp. 30
From War Finance to Catastrophep. 37
Noncommercial Credit in Depression and Warp. 43
The Age of Managementp. 48
Monetary Policy and the Employment Actp. 52
Listening to the Academicsp. 57
Monetary Walrasianismp. 60
A Dissenting Viewp. 65
The Art of the Swapp. 71
Currency Swaps and the UIP Normp. 72
Brave New Worldp. 79
From Modern Finance to Modern Macroeconomicsp. 85
What Do Dealers Do?p. 92
Inside the Money Marketp. 93
Funding Liquidity and Market Liquidityp. 98
Anatomy of a Crisisp. 103
Monetary Policyp. 107
Learning from the Crisisp. 113
The Long Shadow of Jimmy Stewartp. 116
A Stress Test of Moulton-Martinp. 123
Dealer of Last Resortp. 132
Conclusionp. 136
Notesp. 141
Referencesp. 149
Indexp. 159
Table of Contents provided by Ingram. All Rights Reserved.

ISBN: 9780691143989
ISBN-10: 0691143986
Audience: Professional
Format: Hardcover
Language: English
Number Of Pages: 192
Published: 28th November 2010
Publisher: Princeton University Press
Country of Publication: US
Dimensions (cm): 22.5 x 16.7  x 2.0
Weight (kg): 0.39

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