“Their analyses have been of great practical importance in regulating financial markets and dealing with financial crises.” “An important finding in their research is why avoiding bank collapses is vital,” the academy added. The trio’s main work focused on understanding the role of banks in the economy, particularly during financial crises and how banking failures can amplify and self-perpetuate a crisis.

He argued at the time that there was no legal way to save Lehman so the next best thing was to let the bank fail and use the government’s financial resources to prevent wider systemic failures. Federal Reserve at the time of Lehman’s collapse in 2008, which became one of the main catalysts of the world’s biggest financial turmoil since the 1930s. Ironically Bernanke was the chair of the U.S. “Even though these bailouts have problems, … they could actually be good for society,” Diamond told a news conference with the Swedish Academy, arguing that preventing the collapse of a financial firm like Lehman Brothers would have made the crisis less severe. If you want to see South Africa change for the better, and you can spare R6.57 a day, then sign up to Maverick Insider and let’s do it together.īanking crisis breakthroughs win Nobel economics prize. We don’t force our readers to pay because not everyone can afford to - we get that - and because it’s essential that the entire electorate have access to knowing what’s really going on. Our journalism has a huge impact in exposing corruption and demanding accountability. If you value that service, and would like to see us stick around to continue delivering that service, then we need our readers’ help. Why should you pay? Well, because we provide a service to you (the news) that you use regularly to stay informed.

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