• Title: The New Lombard Street: How the Fed Became the Dealer of Last Resort
  • Author: Perry G. Mehrling
  • ISBN: 9780691143989
  • Page: 261
  • Format: Hardcover
  • The New Lombard Street How the Fed Became the Dealer of Last Resort Walter Bagehot s Lombard Street published in in the wake of a devastating London bank collapse explained in clear and straightforward terms why central banks must serve as the lender of last re
    Walter Bagehot s Lombard Street, published in 1873 in the wake of a devastating London bank collapse, explained in clear and straightforward terms why central banks must serve as the lender of last resort to ensure liquidity in a faltering credit system Bagehot s book set down the principles that helped define the role of modern central banks, particularly in times of criWalter Bagehot s Lombard Street, published in 1873 in the wake of a devastating London bank collapse, explained in clear and straightforward terms why central banks must serve as the lender of last resort to ensure liquidity in a faltering credit system Bagehot s book set down the principles that helped define the role of modern central banks, particularly in times of crisis but the recent global financial meltdown has posed unforeseen challenges The New Lombard Street lays out the innovative principles needed to address the instability of today s markets and to rebuild our financial system Revealing how we arrived at the current crisis, Perry Mehrling traces the evolution of ideas and institutions in the American banking system since the establishment of the Federal Reserve in 1913 He explains how the Fed took classic central banking wisdom from Britain and Europe and adapted it to America s unique and considerably volatile financial conditions Mehrling demonstrates how the Fed increasingly found itself serving as the dealer of last resort to ensure the liquidity of securities markets most dramatically amid the recent financial crisis Now, as fallout from the crisis forces the Fed to adapt in unprecedented ways, new principles are needed to guide it In The New Lombard Street, Mehrling persuasively argues for a return to the classic central bankers money view, which looks to the money market to assess risk and restore faith in our financial system.

    One Reply to “The New Lombard Street: How the Fed Became the Dealer of Last Resort”

    1. I read this book in conjunction with taking the author's Coursera class on the economics of money and banking (superb) so my review is colored by having that course in the back of my mind. The book ties together the big ideas while the course provides some of the technical plumbing behind these ideas, so they fit quite well; the book also likely stands alone quite well as a work of financial and intellectual history. It is relatively short; the first few chapters discuss the history of central b [...]

    2. Like most of Perry Mehrling's books, this one demonstrates deep scholarship and original thinking, and although there's much to disagree with as always, there's even more that provokes thought and reflection. This book basically synthesizes Mehrling's other two works (one on the institutionalist monetary thought of the 1910s through 1950s, and the other on Fischer Black's work on the Capital Asset Pricing Model) and uses them to analyze the recent financial crisis. Trying to place himself betwee [...]

    3. InsightfulProvides great insight into the Feds behavior and motives. Both of which are so often misrepresented by mainstream media and politicians.

    4. It is an inspiring book. The conventional role assigned to the Fed since its establishment was the Lender of the Last Resort, the idea behind which dated back to 19th century. But the author in this book argued that Fed was no longer only in a position to extend discount loans to financial institutions in liquidity crisis by a punishment rate as proposed by the Bagehot rule, but also has got deeply involved in the money market and capital market by holding and selling securities and other assets [...]

    5. "The economics view and the finance view meet in the present, where cash flows emerging from past real investments meet cash commitments entered into in anticipation of an imagined future. This present is the natural sphere of the money view. But both economics and finance abstract from money; for both of them, money is just the plumbing behind the walls, taken for granted." (4)"The point is that, in a really severe crisis, market liquidity is no longer a matter of the funding liquidity of priva [...]

    6. A perfectly reasonable discourse on how the global monetary system functions, highlights on its weaknesses and historical failure points, and only briefly on the possible remedy against future systemic collapse. This book is dense, pithy, non-sensationalist, and skirts academic ideology. It requires a re-read, maybe a re-watching of the Coursera course, and is a definite must read for the oligarchy. For everyone else, it may be interesting to know that the syntax of the system has changed since [...]

    7. Perry walks through the history of the Fed focusing mostly on the evolution of policy. He breaks down the recent 2008 crisis, the Fed’s actions, and the ‘plumbing’ of the financial system. The Fed has transitioned from lender of last resort to dealer of last resort. Market liquidity being the main focus in the transition.

    8. You've heard of Credit Default Swaps, Currency Swaps, Interest Swaps, Collateralized Debt Obligations etc but don't understand how they're financed and want to then I think this is a good book to read.

    9. Brilliant. The book offers clear and interesting explanations about boring economic theories since the start of central banking practice.

    Leave a Reply

    Your email address will not be published. Required fields are marked *