Yorulmazer (NY Fed): Case Studies on Disruptions During the Crisis

During the crisis of 2007-09, many funding mechanisms experienced disruptions, when borrowing rates and haircuts reached record-high levels and some funding markets completely froze. This paper discusses several funding mechanisms that experienced significant distress during the crisis. For each case, we provide a discussion of the size and the evolution of the mechanism, the sources of the disruptions, and the policy responses aimed at mitigating distress and making markets more liquid. In particular, we consider auction rate securities, commercial paper, asset-backed commercial paper, money market mutual funds, the bilateral and tri-party repo markets, credit commitments by banks, dollar funding of non-U.S. banks, and the fragility associated with wholesale funding, using a discussion of the Northern Rock episode.


Available for download here.