The Bonus Trilogy of Banking Crises Science

Is this a sign of anxiety for the immediate future? The 2022 Bank Prize in honor of Alfred Nobel has been awarded to Ben Bernanke, Douglas Diamond and Philip Dibwig, three specialists in financial crises, more specifically on the key role that bank fragility plays in the severity of these crises.

Ben Bernanke is best known for being chairman of the US Federal Reserve (Fed) from 2006 to 2014, when he had to weather the mortgage crisis (2007-2008) by “bailout” US banks through a flood of redemptions of securities and bonds. famous cases quantitative easing (Quantitative Easing), the Fed’s fivefold doubling of the balance sheet to $4 trillion. But it is not for this “exploitation” – controversial today because it is suspected of its existence “Leads to current overheating and inflation”As Jean-Michel Nauleau, former member of the Autorité des marchés Financiers, notes, the economist is honored, but for his research on the history of the 1929 crisis.

“Banks are the contract”

It has already shown that the main means of spreading the crisis in the real economy (bankruptcy, unemployment and the Great Depression) after the initial financial “crash” in October was the chain of bank closures destroyed by the Wall Street crash. In fact, Augustin Lander, professor of finance at HEC, explains, “Banks are the nodes in which information about economic agents, individuals and companies is confronted. If they disappear, this information will not be available and the economy will not function after confidence is restored”. This offer by academic Ben Bernanke, a professor at Stanford, New York and Princeton, convinced Central Bank Governor Ben Bernanke that it was necessary, in order to curb the mortgage crisis, that he would recognize in his country. Diary Having initially downplayed the impact, “bailout the banks”, whatever the cost – the shock of the Lehman Brothers bankruptcy on September 15, 2008 confirmed it at length.

For David Thesmar, professor of finance at the Massachusetts Institute of Technology, Douglas Diamond and Philip Dipvig are themselves “pure” theorists, one at the University of Chicago, the other at St. Louis. They are rewarded for an article that economists describe as “essential” or “essential,” published in … 1983 in Journal of Political EconomyAnd the ” Banking, Deposit Insurance and Liquidity Management ». This article has already opened a long list of research and publications by many of their colleagues on banking system fragility and its remedies. For the economists have shown, when the smoldering fire of the economy’s money has barely begun, that the banks have an intrinsic weakness, included in the nature of their activity: their obligations (the deposits they have collected from savers) are short-lived – savers can withdraw them at the first sign of a loss of confidence – while That their assets (investments and investments in corporate or government securities) are long-term.

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