Not (Yet) a 'Minsky Moment'

Papers and StudiesWe are currently experiencing a liquidity shock to the financial system, initiated by problems in the subprime mortgage market, which spread to securitization products more generally--that is, mortgage-backed securities, asset-backed securities, and asset-backed commercial paper (MBS, ABS, and ABCP). Banks are being asked to increase the amount of risk that they absorb (by moving off-balance sheet assets onto the balance sheet), but the related losses that the banks have suffered are limiting somewhat the capacity of banks to absorb those risky assets. The result is a reduction in aggregate risk capacity in the financial system as losses force those who are used to absorbing risk to have to sell off or close out their positions.

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Charles W. Calomiris is a visiting scholar at AEI.

About the Author

 

Charles W.
Calomiris
  • Charles W. Calomiris, who codirected AEI's Financial Deregulation Project until 2007, is concurrently the Henry Kaufman Professor of Financial Institutions at Columbia Business School. He is also a research associate at the National Bureau of Economic Research, a member of the Shadow Financial Regulatory Committee and the Financial Economists Roundtable, and the coordinator of the "Bank Performance and the Economy" program at the Center for Financial Research at the Federal Deposit Insurance Corporation. His research at AEI spans several areas, from banking and corporate finance to financial history and monetary economics. Mr. Calomiris also served on the 2000 International Financial Institution Advisory Commission. Known as the Meltzer Commission, this congressionally mandated group recommended specific reforms of the International Monetary Fund, the World Bank, the regional development banks, and the World Trade Organization to the U.S. government.
  • Phone: 2128548748
    Email: ccalomiris@aei.org
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