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 System

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 )

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Mark Carey

Board of Governors of the Federal Reserve System ( email )

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Washington, DC 20551
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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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