Summary of Toward a Run-Free Financial System

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Toward a Run-Free Financial System summary
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Rating

7 Overall

8 Importance

7 Innovation

7 Style

Recommendation

In 2008, runs on financial institutions had a devastating impact on the world’s economy. University of Chicago professor John H. Cochrane says runs were the major culprits behind the crisis and believes the same thing could easily happen again in today’s environment. He explains why overregulation will not work, and advocates restructuring the financial system through measures such as shoring up bank equity and avoiding run-prone assets. Cochrane effectively pokes holes in the current American financial and regulatory systems. His proposals, many of which echo those under consideration in Europe, may make sense for the United States as well. getAbstract recommends this report to financial executives, analysts and policy makers who might be intrigued by this line of thinking.

In this summary, you will learn

  • How runs on the financial system contributed to the 2008 financial crisis,
  • Why current regulations are unlikely to halt such runs in the future and
  • What alternative measures could lead to a “run-free financial system.”
 

About the Author

John H. Cochrane is a finance professor at the University of Chicago Booth School of Business.

 

Summary

Running on Empty
The downfall of the financial system in 2008 boiled down to runs on assets and financial institutions. From the swift devaluation of asset-backed securities to the plunge in housing prices, runs by panicked investors paved the way toward recession. Subsequent attempts...

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