Institutional Cash Pools and the Triffin Dilemma of the U.S. Banking System
By Zoltan Pozsar. Social Science Research Network, 2011
184 citations recorded by the source corpus.
Through the profiling of institutional cash pools, this paper explains the rise of the "shadow" banking system from a demand-side perspective. Explaining the rise of shadow banking from this angle paints a very different picture than the supply-side angle that views it as a story of banks’ funding preferences and arbitrage. Institutional cash pools prefer to avoid too much unsecured exposure to banks even through insured deposits. Short-term government guaranteed securities are the next best choice, but their supply is insufficient. The shadow banking system arose to fill this vacuum. One way to manage the size of the shadow banking system is by adopting the supply management of Treasury bills as a macroprudential tool.
Subfields: Economics and Econometrics, Finance
View Paper: https://www.semanticscholar.org/paper/f2b6177a34c26cb5931132a7f6d7466ea6dd662f
Citations in the corpus
- Bagehot was a Shadow Banker: Shadow Banking, Central Banking, and the Future of Global Finance (2013, unknown): “Pozsar’s work on institutional cash pools has emphasized the former (Pozsar 2011); here we emphasize equally the latter idea, which we treat as arising from techniques of modern portfolio management in which invested capital is all held in money form, and risk exposure is achieved using derivatives…”
- Financial Regulation in a Quantitative Model of the Modern Banking System (2017, unknown): “Since Sidrauski (1967) money-in-the-utility specifications have been used to capture the benefits from money-like-securities for households in macroeconomic models.”
- Shadow Banks and Macroeconomic Instability (2017, unknown): “…argue that the financial sector’s drive to produce apparently safe debt-like securities in the run-up to the subprime crisis hinged on strong portfolio preferences for such assets by large institutional cash pools (Pozsar, 2011; Gorton and Metrick, 2012b) and by foreign creditors (Bernanke, 2011).”
- Fire‐Sale Spillovers and Systemic Risk (2015, unknown): “From this data we construct for each dealer a monthly average balance sheet and then form the matrices A, M and B.23 As in the analysis of Section 3, we initially set liquidity 22See Pozsar (2011) for a discussion of large cash investors.”