TY  - JOUR
AU  - Shleifer,Andrei
AU  - Vishny,Robert W.
TI  - Asset Fire Sales and Credit Easing
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 15652
PY  - 2010
Y2  - January 2010
UR  - http://www.nber.org/papers/w15652
L1  - http://www.nber.org/papers/w15652.pdf
N1  - Author contact info:
Andrei Shleifer
Department of Economics
Harvard University
Littauer Center M-9
Cambridge, MA 02138
Tel: 617/495-5046
Fax: 617/496-1708
E-Mail: ashleifer@harvard.edu

Robert W. Vishny
Booth School of Business
The University of Chicago
5807 South Woodlawn Avenue
Chicago, IL  60637
Tel: 773/702-2522
Fax: 773/834-1920
E-Mail: Rvishny@gmail.com
AB  - In a January 2009 lecture on the financial crisis, Federal Reserve Chairman Bernanke advocated a new Fed policy of credit easing, defined as a combination of lending to financial institutions, providing liquidity directly to key credit markets, and buying of long term securities.  We show that Bernanke's analysis and recommendations can be naturally considered in a model of "unstable banking," which relies on two mechanisms: 1) fire sales reduce asset prices below fundamental values, and 2) financial institutions prefer speculation to new lending when markets are dislocated.  We analyze credit easing and compare it to alternative government interventions during the crisis.
ER  -