1. International Banking Crises: A Dossier Mauro F. Guillén

2. Source: Luc Laeven and Fabian Valencia, “Systemic Banking Crises: A New Database.” IMF WP 08/224. Frequency of Financial Crises Twin crisis = banking + currency. Triple crisis = banking + currency + sovereign debt.

3. Selected Banking Crises CountryInitial Year% Nonperforming Loans at Peak Gross Fiscal Cost (% GDP) 4-Year Output Loss (% GDP) Spain1977n.a. 5.6 2.2 Egypt1980n.a.38.1n.a. Chile198135.642.992.4 Senegal198850.017.032.6 USA1988 4.1 3.7 4.1 Sweden199113.0 3.6 0.0 India199320.0n.a. 3.1 Brazil199416.013.2 0.0 Mexico199418.919.3 4.2 Japan199735.024.017.6 Korea199735.031.250.1 China199820.018.036.8 Russia199840.6 6.0 0.0 Turkey200027.632.0 5.4 Argentina200120.1 9.642.7 Source: Luc Laeven and Fabian Valencia, “Systemic Banking Crises: A New Database.” IMF WP 08/224.

4. Source: Carmen M. Reinhardt and Kenneth S. Rogoff, “This Times is Different.” NBER WP 13882 (2008). Sample: N=66.

5. Source: Carmen M. Reinhardt and Kenneth S. Rogoff, “This Times is Different.” NBER WP 13882 (2008).

6. Genesis of a Crisis Scant Regulatory Oversight Originate-and- Distribute Model Deterioration of Underwriting Standards Mortgage Securitization Mispricing of Risk Credit Default Swaps Excess Global Liquidity Crisis Excessive Financial Leverage Low Interest Rates Drive to Increase Investment Returns Rising Real Estate Prices © Mauro F. Guillén, The Wharton School.

7. Growing Importance of Finance Note: Financial services and insurance accounted for 7.8% of U.S. GDP in 2006.

8. Housing Prices

9. Subprime Defaults

10. Mortgage Defaults by Country Source: Analistas Financieros Internacionales, based on OECD data.

12. Debt

14. Leverage

16. Regulatory Balkanization Office of Thrift Supervision Federal Deposit Insurance Corporation Individual States Department of Labor Office of the Comptroller of the Currency Federal Reserve National Credit Union Administration Securities and Exchange Commission Commodity Futures Trading Commission Commercial Banks Thrifts Insurance Companies Securities and Exchanges Futures Credit Unions Industrial Loan Companies Bank Holding Companies Source: The New York Times, 5 October 2008, Sunday Business Section, p. 9.

17. Artist: Laura Gilbert. http://www.securitiesdocket.com/2008/10/04/the-zero-dollar-bill/

18. Possible Actions Guarantees on deposits: most countries. Lowering of reserve requirements. Deposit freeze: e.g. Argentina ‘01. Bank holiday. Liquidity assistance. Unloading of bad debt. Insurance of bad debt. Bank intervention & restructuring: –e.g. Spain ’77, Sweden ‘91, Mexico ‘94 Japan ‘97, Korea ‘97, China ’98, Turkey ‘00. Bank liquidations: –e.g. Spain ‘77, Egypt ’80, Chile ’81, Senegal ‘88, USA ‘88, Sweden ‘91, Japan ’97, Korea ’97, Russia ’98, Turkey ‘00.

19. Stumbling Along

20. Activist Fed

21. Liquidity Assistance

22. So Far Countrywide [BoA]. IndyMac [Gov’t]. Washington Mutual [JPM]. Wachovia [WF or Citi?]. Freddie Mac [Gov’t]. Fannie Mae [Gov’t]. AIG [Gov’t]. Bear Stearns [JPM]. Merrill Lynch [BoA]. Lehman Brothers. Goldman Sachs (*). Morgan Stanley (*). GE Capital (?). (*) Turned into bank holding companies.

23. The Investment Banks

25. The Wall Street Tournament

28. Biggest Write-Downs

29. European Woes Britain: Northern Rock, HBOS, Bradford & Bingley. France: Société Générale. Switzerland: UBS. Germany: IKB Deutsche Industriebank, Hypo Real Estate, the Landesbanks. Benelux: Fortis, Dexia. Italy: UniCredit. Spain: The small savings banks. Ireland: Bank of Ireland, Allied Irish Bank, and four others. Iceland: Glitnir Bank.

31. Resurgent Sun? Sumitomo Mitsui Financial Group invested $1 bn in Barclays. Mizuho invested $1bn in Merrill Lynch. Mitsubishi UFJ is paying: –$3.5 bn for 35% of UnionBanCal. –$8.4 bn for 20% of Morgan Stanley. Nomura has bought the Asian, European, and Middle Eastern divisions of Lehman.

32. Source: Sovereign Wealth Fund Institute. Sovereign Funds to the Rescue Barclays PLC Quatar Investment Authority 7.7 3,483

33. When the end of the world arrives, how will the media report it? USA Today WE’RE DEAD. National Enquirer O.J. AND NICOLE, TOGETHER AGAIN. Wired THE LAST NEW THING. Rolling Stone THE GRATEFUL DEAD REUNION TOUR. Discover Magazine HOW WILL THE EXTINCTION OF ALL LIFE AS WE KNOW IT AFFECT THE WAY WE VIEW THE COSMOS? Inc. Magazine TEN WAYS YOU CAN PROFIT FROM THE APOCALYPSE. The Wall Street Journal DOW JONES PLUMMETS AS WORLD ENDS. The Economist WORLD EXTINCT, CAPITALISM SURVIVES.