Revenge of the Steamroller: ABCP as a Window on Risk Choices

61 Pages Posted: 11 Apr 2013

See all articles by Carlos Oscar Arteta

Carlos Oscar Arteta

Board of Governors of the Federal Reserve - Division of International Finance (IFDP)

Mark Carey

Board of Governors of the Federal Reserve - Division of International Finance (IFDP) - International Banking Section

Ricardo Correa

Board of Governors of the Federal Reserve System

Jason D. Kotter

Brigham Young University - Department of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: April 9, 2013

Abstract

We empirically examine financial institutions' motivations to take systematic bad-tail risk in the form of sponsorship of credit-arbitrage asset-backed commercial paper vehicles. A run on debt issued by such vehicles played a key role in causing and propagating the liquidity crisis that began in the summer of 2007. We find evidence consistent with important roles for both owner-manager agency problems and government-induced distortions, especially government control or ownership of banks.

Keywords: Risk decisions, systemic risk, bank runs, financial crisis, commercial paper

JEL Classification: G20, G01, G32, G38

Suggested Citation

Arteta, Carlos Oscar and Carey, Mark and Correa, Ricardo and Kotter, Jason D., Revenge of the Steamroller: ABCP as a Window on Risk Choices (April 9, 2013). FRB International Finance Discussion Paper No. 1076. Available at SSRN: https://ssrn.com/abstract=2249090 or http://dx.doi.org/10.2139/ssrn.2249090

Carlos Oscar Arteta (Contact Author)

Board of Governors of the Federal Reserve - Division of International Finance (IFDP) ( email )

20th St. and Constitution Ave.
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Washington, DC 20551
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202-736-5638 (Fax)

HOME PAGE: http://www.federalreserve.gov/research/staff/artetacarloso.htm

Mark Carey

Board of Governors of the Federal Reserve - Division of International Finance (IFDP) - International Banking Section ( email )

20th & C Streets NW
Washington, DC 20551
United States
202-452-2784 (Phone)
202-452-5295 (Fax)

Ricardo Correa

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Jason D. Kotter

Brigham Young University - Department of Finance ( email )

United States

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