Published by FT Publishing International (May 26, 2011) © 2011
Adrian BuckleyPreface
Acknowledgments
Chapter 1 An overview of the financial crisis 2007/8
Introduction
The good times
New models of lending
The time bomb ticks
The time bomb explodes
Why, oh why did no-one see it coming?
Escape
Timeline of the financial crisis 2007/8
Chapter 2 Governments and the financial crisis
Introduction
Externalities
Government regulation
Economic intervention
Government deficits
Demand management
Monetary policy
Fiscal policy
Lobbying
Summing up
Chapter 3 Personal finance, housing and the financial crisis
Introduction
Housing
Mortgage borrowing
Credit card and other personal debt
Pensions
The housing market strikes back
Chapter 4 The business of banking
Introduction
Banks in general
Commercial banks
Investment banks
Bank holding companies
Glass–Steagall act
Central banks
Asset–liability mismatch
The bank bonus culture
The bank bonus culture and declining standards
Risk/return implications of the bank bonus culture
Bank balance sheets
Moral hazard
Lender of last resort
The shadow banking system and non-bank financial institutions
Chapter 5 Subprime lenders and borrowers
Introduction
Community Reinvestment Act
The business of subprime lending
The dubious economics of subprime lending
Structured Instrument Vehicles (SIV) and conduits
Repackaging mortgages
Rating agencies
Chapter 6 Credit default swaps and toxic assets
Introduction
How do credit default swaps work?
Drivers of the CDS market
Correlations and credit ratings
The unwinding
Chapter 7 Bank lending and control systems
Introduction
Normal commercial bank lending criteria
Lending control systems
Value at Risk and risk management
Bank capital adequacy
Chapter 8 Regulation
Introduction
The need to regulate financial services
Capital adequacy and liquidity
Lender of last resort
Deposit insurance
Tight versus loose regulation
The US system of financial regulation
The UK system of financial regulation
Eurozone regulation
International regulation
Too big to fail
Mark-to-market accounting
Chapter 9 The business cycle, booms, busts, bubbles and frauds
Introduction
Booms, busts and bubbles
Frauds and swindles
Charles Ponzi
Bernard Madoff
What makes Ponzi schemes crash?
Chapter 10 Finance theories
Introduction
Earnings versus cash flow
Market efficiency
The efficient markets hypothesis
The capital asset pricing model
Risk and uncertainty
Risk management models and the normal distribution
Options
Behavioural finance
Conclusion
Chapter 11 Other academic theories
Introduction
Culture and conformity
Self-interest
Bonuses
Mathematical economics
Creative destruction
The insights of Hyman Minsky
The Austrian School of Economics
An eclectic view
Final words on self-interest
Chapter 12 Bank failures in the USA
Introduction
Case 12.1 Bear Stearns
Introduction
Recent history
Into the abyss
J.P. Morgan to the rescue
Case 12.2 Lehman Brothers
Introduction
Bankruptcy
Repo 105
Property
The CEO
Case 12.3 American International Group (AIG)
Introduction
AIG Fina