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Are the Bailouts of Wall Street Complements or Substitutes?

33 Pages Posted: 24 Mar 2012 Last revised: 3 Sep 2012

Linus Wilson

University of Louisiana at Lafayette - College of Business Administration

Yan Wendy Wu

Wilfrid Laurier University

Stephanie Prejean

affiliation not provided to SSRN

Date Written: March 21, 2012

Abstract

The Term Securities Lending Facility (TSLF) lent $2.3 trillion worth of general collateral to eighteen investment houses in exchange for riskier securities. Treasury collateral was in high demand in 2008 and 2009 as repo markets shunned lower quality collateral. This paper finds a negative and significant relationship between participating in the TSLF and having funds from the Troubled Asset Relief Program (TARP) and other Federal Reserve lending programs. Thus, it appears that the TSLF was a substitute for other bailouts. In addition, dealers with higher paid CEOs were more likely to borrow in the next TSLF auction cycle.

Keywords: bailout, Capital Purchase Program (CPP), CEO pay, Dodd–Frank emergency lending, Federal Reserve, financial crisis, general collateral, investment banks, primary dealers, repos, section 13(3), securities dealers, Troubled Asset Relief Program (TARP), Term Securities Lending Facility (TSLF)

JEL Classification: G01, G18, G2, G24, G28

Suggested Citation

Wilson, Linus and Wu, Yan Wendy and Prejean, Stephanie, Are the Bailouts of Wall Street Complements or Substitutes? (March 21, 2012). Midwest Finance Association 2013 Annual Meeting Paper. Available at SSRN: https://ssrn.com/abstract=2026988 or http://dx.doi.org/10.2139/ssrn.2026988

Linus Wilson (Contact Author)

University of Louisiana at Lafayette - College of Business Administration ( email )

Department of Economics & Finance
214 Hebrard Blvd., Room 326
Lafayette, LA 70504-0200
United States
(337) 482-6209 (Phone)
(337) 482-6675 (Fax)

HOME PAGE: http://www.linuswilson.com

Yan Wendy Wu

Wilfrid Laurier University ( email )

75 University Ave W
Waterloo, Ontario N2L 3C5
Canada

Stephanie Prejean

affiliation not provided to SSRN ( email )

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