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New York Fed Economists Analyze the Decline in the Labor Force Participation Rate
The ability of any economy to produce goods and services depends partly on the number of people working in the economy. The number of people working depends on the size of the population and the fraction of the population that is working. As we discuss in Macroeconomics, Chapter 9, Section 9.1 (Economics, Chapter 19, Section…
The FDIC Finds a Buyer for Silicon Valley Bank
First Citizens Bank, based in based in Raleigh, North Carolina has purchased Silicon Valley Bank. Photo from the Wall Street Journal. When the Federal Deposit Insurance Corporation (FDIC) took over Silicon Valley Bank (SVB) on March 10, 2023, it kept the bank in operation by setting up a “bridge bank.” The Silicon Valley Bridge Bank…
Why Don’t Financial Markets Believe the Fed?
Fed Chair Jerome Powell holding a news conference following the March 22 meeting of the FOMC. Photo from Reuters via the Wall Street Journal. On March 22, the Federal Open Market Committee (FOMC) unanimously voted to raise its target for the federal funds rate by 0.25 percentage point to a range of 4.75 percent to…
Is the Banking Crisis Over? Some Banks Don’t Seem to Think So
Bank borrowing from the Fed. Figure from the Federal Reserve Bank of St. Louis FRED data set. Discount loans were the Fed’s original policy tool. As we discuss in Macroeconomics, Chapter 15, Section 15.4 (Economics, Chapter 25, Section 25.4) and in Money, Banking, and the Financial System, Chapter 13, Section 13.1, Congress established the Fed…
The FOMC Splits the Difference with a 0.25 Percentage Point Rate Increase
Photo from the Wall Street Journal. At the conclusion of its meeting today (March 22, 2023), the Federal Reserve’s Federal Open Market Committee (FOMC) announced that it was raising its target for the federal funds rate from a range of 4.50 percent to 4.75 percent to a range of 4.75 percent to 5.00 percent. As…
Sheila Bair Would Have Voted “No” on SVB
Photo from Washington College via Wikipedia. Sheila Bair served as chair of the Federal Deposit Insurance Corporation (FDIC) from 2006 to 2011. This week, she was interviewed on the Wall Street Journal’s “Free Expression” podcast. She states that she had still been chair of the FDIC she would have been against the decision on Sunday,…
Somewhere J. P. Morgan Is Smiling: The Attempt by Large Banks to Support First Republic Bank
Wall Street during the Panic of 1907. (Photo from the New York Public Library via Federal Reserve History.) The collapse of Silicon Valley Bank (SVB) on Friday, March 10 highlighted two potential sources of instability in the U.S. commercial banking system: (1) The risk that depositors with more than the Federal Deposit Insurance Corporation (FDIC)…
The Fed’s Latest Dilemma: The Link between Monetary Policy and Financial Stability
AP photo from the Wall Street Journal Congress has given the Federal Reserve a dual mandate of high employment and price stability. In addition, though, as we discuss in Macroeconomics, Chapter 15, Section 15.1 (Economics, Chapter 25, Section 25.1) and at greater length in Money, Banking, and the Financial System, Chapter 15, Section 15.1, the Fed has other goals,…
NEW! 3/13/23 Podcast – Authors Glenn Hubbard & Tony O’Brien discuss the collapse of SVB in the context of a classic bank run. Is it? Listen & find out.
Join authors Glenn Hubbard and Tony O’Brien as they review the collapse of Silicon Valley Bank (SVB) in the context of a classic bank run. What lessons can be learned to avoid other bank collapses in this unchartered economic territory? Will this become a contagion? Or, is it simply an example of a bank searching…
An Old-Fashioned Bank Run: The Collapse of Silicon Valley Bank [This post will be updated as new information becomes available. Updated Monday morning March 13.]
Photo from the Wall Street Journal Rumors spread about the financial state of a bank. Some depositors begin to withdraw funds from their accounts. Suddenly a wave of withdrawals occurs and regulators step in and close the bank. A description of a run on a bank in New York City in the fall of 1930?…
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