We examine changes in banks' market-to-book ratios over the last decade, focusing on the dramatic and persistent declines witnessed during the financial crisis. The extent of the decline and its persistence cannot be explained by the delayed recognition of losses on existing financial instruments. Rather, it is declines in the values of intangibles — including customer relationships and other intangibles related to business opportunities — along with unrecognized contingent obligations that account for most of the persistent decline in market-to-book ratios.
Why are banking systems unstable in so many countries—but not in others? The United States has had twelve systemic banking crises since 1840, while Canada has had none. The banking systems of Mexico and Brazil have not only been crisis prone but have provided minuscule amounts of credit to business enterprises and households.
Following its IPO in 2000, Moody's had two shareholders, Berkshire Hathaway and Davis Selected Advisors, who collectively own about 23.5% of Moody's from 2001 to 2010, the entire sample period. Moody's ratings on corporate bonds issued by important investee firms of these two stable large shareholders were more favorable relative to S&P's ratings. Moody's relatively favorable ratings are increasing in the size and duration for which large shareholders hold the investee firms. The results cannot be explained by issuer characteristics or by greater informativeness of Moody's ratings.
The Great Inflation: The Rebirth of Modern Central Banking
Frederic Mishkin comments on Takatoshi Ito's chapter "Great Inflation and Central Bank Independence in Japan," expressing doubt that the Bank of Japan achieved de facto independence in 1975. Rather, he sees the bank as continuously subordinated to government pressure throughout the period. What differed at the end of the 1970s was that the government favored tightening. He also posits that the Japanese experience demonstrates that if the central bank has credibility for low inflation that oil price shocks need not be inflationary.
In this paper, we develop an account of the failure of private market-governance institutions to maintain market order by highlighting how control of their distributional function by powerful elites limits their regulatory capacity. We examine the New York Clearing House Association (NYCHA), a private market-governance institution among commercial banks in Manhattan that operated from 1853 to 1913.
