Relevant Ifo Policy Issues: Bank Regulation | German State Banks
Limited financial crises are not uncommon. Historical examples are the world debt crisis at the beginning of the 1980s, the Savings & Loan crisis at the beginning of the 1990s or the Latin America crisis from 1998 to 2002. Although the regions involved suffered from the aftermath, sometimes for years thereafter, none of these crises approached the proportion of the global financial crisis that reached its climax in autumn 2008 with the collapse of Lehmann Brothers, one of the world’s largest investment banks, and which took the international financial markets to the brink of disaster. Thanks to the historically unprecedented state intervention in the form of bank rescue programmes and nationalisation, a run on savings deposits by bank customers was prevented. At the heart of the crisis was the US real-estate market, whose growth over the years was financed by the formation and sales of mortgaged-backed securities to domestic and foreign investors. After the bursting of the residential real-estate bubble, bank portfolios were faced with enormous write-downs that threatened to exhaust their low capital reserves.
The causes of the crisis are complex. They are linked, however, to the macroeconomic imbalances that have built up since the mid-1980s. The savings rate of US households, for example, constantly declined, approaching zero between 2005 and 2007. Analogously, the US current account deficit rose continuously and was financed via capital imports from countries such as China, Germany and Japan. Non-recourse loans for homes, an undercapitalised banking system, the invention of structured forms of securitisation, careless rating agencies and not least American housing policies contributed to the sales of these highly risky securities throughout the world, culminating in an all-embracing banking crisis.
Current contribution in the media (Contributions in Press, TV and Radio )
"Weltwirtschaft in der Krise: Liegt der Fehler im kapitalistischen System – oder ist das System der Fehler?", Ein Essay von Hans-Werner Sinn, Download (PDF, 76 KB) / Audio (29 min.).
Hans-Werner Sinn Casino Capitalism: How the Financial Crisis Came About and What Needs to be Done Now Oxford University Press, August 2010 Updated English-language version of: Kasino-Kapitalismus: Wie es zur Finanzkrise kam, und was jetzt zu tun ist Econ Verlag: Berlin 2009 Korean Translation
Hans-Werner Sinn: Risk Taking, Limited Liability, and the Banking Crisis. Selected Reprints Ifo Institute: Munich 2008 Contents and Downloads
Tables, charts and reports provided by Ifo's Database for Institutional Comparisons in Europe DICE Additionally to the listed tables you will find information on Bank Regulation and Supervision in a DICE Special.
Deposit Insurance: Authority (Table | 29.10.2008 | Details | Download)
Deposit Insurance: Coverage (Table | 29.10.2008 | Details | Download)
Deposit Insurance: Event Insured (Table | 29.10.2008 | Details | Download)
Deposit Insurance: Funding (Table | 29.10.2008 | Details | Download)
Ifo publications and media coverage
A complete list of Ifo Policy Issues
This discussion forum is open to comments on Hans-Werner Sinn’s publications and press statements.
Introduction and current discussion topics
Forum Financial Market Crisis
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