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ECON 252: Financial Markets

Lecture 13 - Banks. Banks are among our most enduring of financial institutions. Their survival in so many different historical periods is testimony to their importance. Professor Shiller traces the origins of interest rates from Sumeria in 2000 BC, to ancient Greece and Rome, up to the Song Dynasty in China between the 10th and the 12th century. Subsequently, he looks at banking in Italy during the Renaissance and at the goldsmith bankers in 16th and 17th century England. Banks have survived so long because they solve adverse selection and moral hazard problems. Additionally, he covers Douglas Diamond's and Philip Dybvig's model, which does not only analyze the banks' role for liquidity provision, but also reveals the possibility of bank runs. This leads Professor Shiller to deposit insurance as a means to prevent bank runs. He discusses the Federal Deposit Insurance Corporation as well as the Federal Savings and Loans Insurance Corporation, together with the role that the latter played during the savings and loan crisis of the 1980s. The necessity to regulate banks in the presence of deposit insurance results in a discussion of the role of the Basel commission and an explicit calculation to illustrate the core principles of Basel III. At the end, Professor Shiller provides an overview of financial crises since the beginning of the 1990s, with the Mexican crisis of 1994-1995, and the Asian crisis of 1997. (from oyc.yale.edu)

Lecture 13 - Banks

Time Lecture Chapters
[00:00:00] 1. Introduction
[00:02:52] 2. Basic Principles of Banking
[00:10:46] 3. The Beginnings of Banking: Types of Banks
[00:24:00] 4. Theory of Banks: Liquidity, Adverse Selection, Moral Hazard
[00:33:03] 5. Bank Runs, Deposit Insurance and Maintaining Confidence
[00:41:07] 6. Bank Regulation: Risk-Weighted Assets and Basel Agreements
[00:53:27] 7. Common Equity Requirements and Its Critics
[01:02:49] 8. Recent International Bank Crises

References
Lecture 13 - Banks
Instructor: Professor Robert J. Shiller. Resources: Multiple-Choice Quiz [PDF]. Transcript [html]. Audio [mp3]. Download Video [mov].

Go to the Course Home or watch other lectures:

Lecture 01 - Introduction and What this Course Will Do for You and Your Purposes
Lecture 02 - Risk and Financial Crises
Lecture 03 - Technology and Invention in Finance
Lecture 04 - Portfolio Diversification and Supporting Financial Institutions
Lecture 05 - Insurance, the Archetypal Risk Management Institution, its Opportunities and Vulnerabilities
Lecture 06 - Guest Speaker David Swensen
Lecture 07 - Efficient Markets
Lecture 08 - Theory of Debt, Its Proper Role, Leverage Cycles
Lecture 09 - Corporate Stocks
Lecture 10 - Real Estate
Lecture 11 - Behavioral Finance and the Role of Psychology
Lecture 12 - Misbehavior, Crises, Regulation and Self Regulation
Lecture 13 - Banks
Lecture 14 - Guest Speaker Maurice "Hank" Greenberg
Lecture 15 - Forward and Futures Markets
Lecture 16 - Guest Speaker Laura Cha
Lecture 17 - Options Markets
Lecture 18 - Monetary Policy
Lecture 19 - Investment Banks
Lecture 20 - Professional Money Managers and their Influence
Lecture 21 - Exchanges, Brokers, Dealers, Clearinghouses
Lecture 22 - Public and Non-Profit Finance
Lecture 23 - Finding your Purpose in a World of Financial Capitalism