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Financial Instability and the Decline (?) of Banking: Public Policy Implications Hyman P. Minsky* Working Paper No. 127 October 1994 *The Jerome Levy Economics Institute of Bard College Definition I. Banking supplies plays the means capital organizations These the trend function and as part at par --needs significance to of which longer Federal be financing, but evaluation by portfolio the affect rather stability the evaluation of by these the banking extent by caeter:ls it seems, in to those Reserve bank affecting role of uncertainty When by viability Central financial by that available operations. affect uncertainty: markets. growth of banks the availability of the the always policy (of defined)--to liabilities are operations the economy "control" "declining" of monetary the broadly mechanism The managers role banks; that changing by the Banks, payments efficacy may and assure for the by that examine reviewed. and into continue. (Central the resources scores it economy: decreasing a as banks suggest to be channels no will and regulate, money; On both to chartered organizations supervise, bank are capitalist it channels performed developments government of that that paribus, and of the economy. being are in a modern of payments development functions roles two of the Problem The economy cost or has affecting of the of enterprises Bank operations market agents, 2 market reactions operations. 1 will The decrease development the Federal structure of that financial institutions the In general, second plane decisions) This is that financial rules that paper institutions and the of the the and contain on concentrates and usages" policy economic theory. economic policy especially significantly of the day. policy economic It behooves to make true if the different of way. takes guide (and place of them. on the The administrative operations the policy existing operations and banks of banking in setting financial markets. "legislating second plane. II. Theoretical Every on are importance involvement banking that supervision should government the the policy and of The in a serious legislation of regulatory relative day-to-day structure and the markets, as our and if any, that rules, affects constrain of the that whether on economic capital significance unchanging. is of the investment even to be changed is that the to like regulation discourse the in the banks as of that more decline size organizations frozen needs and the "authorities" and One "planes." two major facing, structure institutional some the relative are chartered institutions to increase firms from with in financing operate remains emerges of banks banks rating banks of line Commission That System. bond for out tends Exchange as commercial is an issue problem economy and Reserve chartered be in the weight of the Securities often "where reflects argument anyone who the theory conventional from" of maintained a analyzes he is coming maintained from Background and advocates clear. the This analyst or orthodox is is theory 3 comment This instability financial Theory of Keynes. Theory Keynes cycles business General in The General aggregate conditions, financing that processes among of income determine the path through utility about economy that functions Keynes neutral. In over the Theory the theory neutral. institutions circumstances in quite money prices assets. 3 In viewed the as generate a the time. of different current set path of of once upon money into and interacting, from the 112 me. financial and finance are in general and financial economy through time. special result of the the the rather money interdependent economic multi-market because money determination hypothesis, pertinent creation the but wages, . is which not is . entangled the of money the ". path ways of into of escaping instability results went of an behavior. that in monetary outputs the is changes money rigid as financial The the of that developed, is built, affect such theory to functions, and maximizing which Theory, Keynes non-neutrality enters a process equilibrium by production variables", In particular, will static specified the effort as hypothesis of the neo-classical of the Quantity instability This "real described General confusions is fully of proposition The the properties leads which theory, economic the from radically quite differs view "neo-classical" abstract real that The of an investment theory of for investment theory of Interactions demand, Keynesian propositions not financial holds of the of of the economy. orthodox of and and the distribution This One foundations investment determine time out the economies. capitalist demand, interpretation a perspective the interpretation hypothesis This set from written is price the of of capital economy processes variables interactions the is that through are most 4 often but tranquil, the interacting as incoherent from processes interactions between commitments markets. These a generating deep depressions and systemic deviations orthodox theory optimums, the which are the arise determined are incomes paid for were fulfill payment in assets. the cash flows assets commitments into simple in order with to of gross of that such policies. 5 in finance which business Gross capital sufficient, made during investment validating instruments, liability cycles incomes, demand: sufficient, financial deep and positions economies. for the commitments, capital case, as business aggregate the as and or prior spending prices well structures investments to seriously often payment the lead holds flaws, commitments serious processes are both Whereas investments available to income an lead market between skeletal embodied characteristic hypothesis, than and in by apt economic capitalist to capital entered in more the fulfilling structure the either In determines flows as determined output. these of financing be financings. of interactions endogenous can insufficient by they processes effect and the assets, to hypothesis instability in the process due are associated from potential can be contained from the system.' decentralized full of of simultaneously is inflations: market periods flows the essential it of as well outcome of assets instability financial result cycles the depressions, in capital that capitalist However, mainly severe that payment and incoherence financial flawed. In that effect conditions holds income, reflect of output finds of and long of cumulative natural a and a financial turbulence outcomes theory and the prices economy, system Economic flows the turbulent as interactions capitalist time This occur financial of to generates behavior. behavior incoherent time as which positions 5 In our foreign governments debt-finance too, world, complex need finance and some of to validate some households, their activities debts current have enterprises inherited demands for government units, and outstanding debts, and internationally. from the past, even as they with new as an interpretation of and goods They, services debts.6 III Debt The Keynes financial starts The with General great the Keynes of Great condition the for familiar economy and market changes addition, as practices adjust over and Economy Irving shortly that banking Fisher's after culminated system Debt in Deflation the in the Theory 8 overindebtedness This and enjoys in period changes assets of good are times. new institutions, new are one aspect way periods of innovations, evident to new technologies of the of form extended out initial an capital in an extended the is arises positions especially is during States' deflation. changes, instruments, and access with investment Institutional United argument, a debt as the financing the 7 Depressions. way financed these good of the times. days, of communicating, In financial computing, to files. Fisher is now of Fisher's written of the American of 1932-33 was In was Theory collapse hypothesis two observations: contraction winter in instability Deflations clear did not that explain over how overindebtedness an extended period of good developed. times, It during 6 which the use wariness of evaluation as the of debt use the of the margin of of safety proportions outstanding contracts uncertainty being articulation of to in liability to service payments the and objective diminishes flows are even the of pledged as by views of the the closer as income chances even diminishes, Subjective debts. decrease carried increases failure cash subjective The structures expected prior gains, attenuates. of project of debt well-advertised debt likelihood ever-larger payments leads to these fund contracts being not fulfilled. Impact of the Great After of 1929-33 weaknesses in the information potential Reserve the had interpretation current the investors to be picked of behind by up and put running structure, provided to the organization together, the to their the emphasized all and powers great the depression great the corporations way from investors and of the Federal System. Federal panic of Reserve financial unable to stem the wave 1929-33 period, Government's some needed: crashes a interface device banking Depression and then, in place after motive and had its founding of banks developed the than in place that banking the and Federal to contain financial of a "permanent" for in the of insolvency other a period created As the with two was impossible. consensus had to be put The System One 1907. future Great left pieces financial that The window the when 1933, contraction Depression phases: first of study and debate, structure. came was Federal a make was the of the system was discount Reserve's crises. the emergency reform: The second of over retooling financial of to Reserve and firms solvency legislation aftermath phase era of the provisions the setting took place mainly place in 1935 and a structure depression The 1936. so that could a financial not happen of the in written particular either banking, economically This place. by monetary, or history another round system: to provide furnish channels to leading set in to a great get United money States could be After a right. had a new structure was reform a safe 1930's structure and subsequent reflects placed for the to and financing reform, requirements compatible of the politically, of of of the history attempts of was again.' economic terms reform collapse IV. The Reforms Much of object and upon sound financing the the failure, two not medium of the of put completely banking exchange, capital in followed and monetary failed, and development to of the economy. Compartmentalization Two be said principles, to reformed the and Transparency have governed the private government's in place compartmentalization the Compartmentalization into limited-domain particular other that have of referred One aspect commercial the from industry special-purpose market financing of particular of structure financial which the basic systems types positions of investment act. that and set is or in particular of assets compartmentalization to as Glass-Steagall can in place. protected in financing, or in the provision units. separation commonly institutions of The largely within compartments, types industries, means mid-1930's and financial banking, is still transparency, in the structure. in the mid-1930's divided legislation monetary, regulatory and banking, In addition, is what for the is special 8 financing agricultural Finance supervised the industries, and government acted that determined to offset take over were always the or guarantee honored were, and The that in large United corporate form transparency of markets in "second hand" In addition, bought which initial securities the markets were corporate to market- rather be than an Federal an bank implicit up as to deposits The Government to limits set legislation, which was was that economy of created Reserve. capitalist sold, small deposits a recognition in which dominates. truthful information, and was of activity takes place and to be publicly financial on the in those in which available. instruments either manipulation, the The business or third principle that reflects underwriting free Federal eligible were really in which the so guaranteed. that management, The transparency a a from liabilities. initial corporations are of System to became commitments, not, holds principle the Reserve access agencies. carried organizing of a myriad removed and assuring from transparency is other for was debt experience, were States condition financial for of the recent of of of their deposits doctrine the makers, our and Federal currency funds One principle the supply set par insurance bank, backstop government new at The investment railroads, doctrine Reserve a available by Congress. not bills currency Federal ownership, programs. responsibilities deposit endorsement the insurers, Deposit various financing Furthermore, credit. an asset real home electrification. banks, of legislation The reorganized. Reserve and spate for a government of as the place rural Corporation, refinancing same in and resource-development In the rules put exports, credit, Reconstruction was were arrangements were by sold market parties. is necessary institution-based for the operation financial of system. 9 Revelations of scandals losses of investors crash value, integrity as the Dow that meant was institutions was fell 1933 combined to some public's revival facilitated of with in confidence in the wisdom in in banks and the by Federal the 15% of its pre confidence and markets The low. banking, Jones by investment of participating saving in investment government deposit insurance. There was intervention to guarantee in confidence financial and accompany what of reform of financial Loan of information about government like, to units effect transform forth by of the that potential are optimistic borrowers for corporate the needs to operations of with "universal what public confidence one of the without for markets between banks finance in the The securities most successful today's it, skilled professionals, often and of businesses, The financing. he has never the the that economies submitted require founding market not be feasible. operations reflects the era: would banks be required and governance. well Deal privately that accurately New system officers evaluation to the the for of management second-hand the corporate may financing standards and a division in Revival information from) is and legislation efforts oriented finance markets exchange the between with assets. legislation offering, difference markets integrity for government corporate set Commission similar equity Deal New information and economies banking" and of One securities. of security a of other integrity governance, flow value and The a public the and the of debt Exchange and reporting (and of markets. Securities the market-based guaranty some possibility no seen loan views into a pro officer of profit realistic officer that process, the confidential households, loan forma in and joke, he did which expectations expectations not seeks put which 10 to and endorsed can be submitted the bank. The underwriting The role remark of loan about are the designated their living based financing, to play The skeptics similar both lacking 1930s the belief was banking system able take of borrower relations and with identifies loan the officers analysts but the are the assumed continuing often lender that and depositors borrowers financing make In market- understand. banker, of traded who nevertheless security an is arrangements. in an regulation, of the normal and Federal the of banks the was not of of the equity that bank, crisis resolution of of bankrupt solvency infusion into crisis Reserve otherwise The Corporation the instability in 1933. an federal authority result deposit and savings banks, for the to contain climaxed after by were the bankrupt basis. creation standards unable that Finance on a mark-to-market and was involved 1933 diluted of position system commercial problem equity banking The the created the the Reconstruction that was As Reserve of Reserve to rest. Federal natural financing: put was the unions that input publicly of they the of reorganization Federal crisis and in market-based the to for earlier that committees with cited chain risks the When 1907 role of the economy, to a bank's in general formas underwriting to characterize similar in the by accepting roles commitment a pro officers combined process, plays analysts, securities. 10 security by loan oversight of loan the of deposit coverage examination, and a which insurance institutions and organizations, Federal Reserve insurance mechanism assures the credit System. is the of for setting A of supervision, insurer that the 11 insured conforms examination The member banks reserve channel of through creation of banks district generalized result a banking and which economy. Bank Changes were either to take through Federal projected inflation to member information regular source banks. about borrowers. of financing as the Bank Reserve actions or otherwise the structure, As the lenders, the prudence The by use member were manage of the banks (made at would system, was rate at safe a of the of gold, internal an try and District a loss to the Federal the development not fight to the economy. District District of paper through or the endogenously that suffered exchanges that of trade banking rediscount original was with structure of determined. eligible the ability being the capital posted foreign original of the led to the In the needs combined normal being the act banks of Banks) only to the Banks. the By endogenously of financing the place drain. In the base of made the reserved by banks original system facilitated in the the oversight and part of at Reserve of trade. were of paper being. window needs reserves activity which into rediscounting also eligible for reserves reserves Reserve Reserve's secure, to the reserve Federal by discount theory the the Federal brought the act bank by in was responsive the by determined mechanism of the banking responsiveness possible district the demand underlying based of and authority. lender-of-last-resort the which Reserve The a reserves, to lend Federal not it was base act Reserve the supervision, of an insuring rediscounting of was a crisis, banks bank window Rediscounting functions Federal on Regulation, standards. are natural original discount for to set their Banks Banks member discount lenders had a right banks who window legitimated were the as to were a normal regulation, 12 supervision, examination and of member banks by the Federal Reserve. The decade Federal of the century basis of a currency the needs of development an Reserve asset Banks i.e., economy. note as an introduced during the crisis Federal Reserve expected The bank Banking Act policy of the of the United government bank money were not debt and debt as asset the offsets that recovery after again make discount banking the turn, debt War from allowed did Banks. of fiscal This scarce. response to the needs of trade. Korean, government Vietnam, debt and as a the Cold falsified Second wars, percentage by as the the The fiscal of system War. over the GDP of government abolish the In once enable the of the growth spite 1946-1980 fell, was would source enormous World of use would system's during banks banking orthodoxy place debt that The expectation its rightful government National creation not to resume was the the the currency, a resumption expectation still led to a shortage that window This the of trade.11 which debt in the was the Currency. meant at the District government first crisis, under Government available for Reserve was economy States the Civil of 1932-35, of as window. States in eligible it to capital as a change the of to the needs facilities with the after responded Federal when first to be the the periods Comptroller financing rediscount from United upon which, responsive Legislation the that of the and not interaction based was with deposited of 1932, the small debt provision Aside of system in facilitated on the discount currency was too government emergency System's because department procedure. to be based that issuing viewed operating debt Making was normal created and a banking trade, the been the government supply of the for had of of the period ratifying the 13 expectations of fiscal federal the government debt and for the of government relative Whether thereby structure for operations mismatch the the the in central central that it bank is different than that an a paper and is an of open apt be System a economy: to market well very Reserve open that a and discount operations market bank. V. Today's The financial systems financial systems of since end World the collapse the may the of System banks by way Federal with structure rule.12 eligible There interacts the Reserve operates of the Today, examination commercial faced. structure which be the of 1980, of expectations Federal for with and to process base been the the Banks Bank never between of reserve a Central has manner window Reserve election dealing will destruction dramatically. reflect supply structure district create policy to the the regulation, has money of increased future, supervision, government-debt-based created GNP to institutions a result following system foreseeable financial As 1930’s. the of prior the beginning reason for this the of money supply activity War II means need no which Furthermore, bank the reserve capitalisms 1936. there such has as had and the not been often that reserves a decline longer be lowers with base government and bank the half-century a traumatic during collapses had One depression. are in a result the not occurred such long-lasting the are Over Historically, is that accommodations. portfolios of of a deep This debt. or 1940. change government today's markets, to marked business 1907 of financial century of Capitalism now based reserves of debt and a decline for demand available deposits upon will in in bank for be 14 if even sustained bank lending households and business to decreases. An of a additional deep fall in which and depression does what normally This depression. equivalent incomes. 13 policy profits. The occurred primarily had had decreases great the a collapse, recession deep a absence capitalism incomes deficits or are the capital aggregate sustaining secondarily increased and as that which formula then liquidity preference the in asset price rate but ruled then in The decreased values being in an assets 1929-33, asset double profits greater index of and liquidity and equities small-government the numerators pricing precipitously, and and for the in recent, the discounting preference for capital collapsed. level because (the capital and (current, incomes occur, traumas as it stabilizes aggregate in the 1930's values asset of capital The slightly, off consumer in the is effective capitalization such fell fall capital government in and only in the present-value tapered that because collapse risen.14 capitalism, first for a big-government happened because fallen financial when reason policy Stabilization expected) in mean investment of Stabilization not so is important that is investment is factor equally as whammy was relation) investment of increased for responsible than the fall the wages of in the employed workers. In our prevented 1990's deficit. monies recent the from financial turning One new in the experience form fiascos into aspect the a main of the late depression was of the economy of pension stabilizing and mutual is the funds. device 1980's the and that early government's growth These of managed funds are 15 funds depends A run from In an to of assets in a failed is no margin asset front are of value further through back government investment, allow implies that to debt the the quality of gross domestic of increase of government policy imposes Such a monetary to monetary banks an the that the rein exuberant relatively payments that but can there equity, no danger to as the though by bank a deposit mainly relies for that the those who be achieved debt rate prices, has of increase but that when GDP level" constraint fiscal and This falls then the one It very rate than inflation. allows big-government arrow can a fiscal regime In by greater upon policy passive. only does of outstanding an income-sensitive expansion. scarce exuberant of the government substantially such and to be compromised. "full-employment tight and policy posture product, government investment, of a fiscal fiscal that upon private profits, relatively policy lead of liquidation. as a significant be force to liabilities Even is also value debt becomes big-government constraining through acts policy capitalism, from the The tight of GDP. these need would partial of the smaller amount to failure and stimulate times significant that 100% discipline a substantially than there of government at normal the "fixed-dollar" as is provided to constrain requires likely of portfolios. for liquidated. process profits surpluses be only policy to sustain is receive withdraw receive stabilization deficits leads can of the values, a bank funds, the time-consuming A not such of mutual line bank would would of safety, the when households, bank value down. Depositors assets. asset redemptions epoch, asset day-to-day to market lower satisfy earlier a main The marking will of securities frozen the a daily funds assets price were upon these liquidate market instruments. value contingent fire to make in financing expensive; i.e., 16 monetary it induces a conservatism will A crunch. economic a s lack policy by creating lower attained is effect ive with policy posture crunches growth GDP to potential by fiscal that aims and threats lowering of posture at of debt the only as portfolio deflations overall ratio of out, in GDP.15 VI. Policy As my 1935 few colleague Ronnie believed that One completed.16 bank argument the was resources This the made was to examination under the independent FDIC. and the off the Phillips As Treasury reports, (as the depositors guarantor as necessary) of the nominal appropriate clean was agenda to pay them reform banking of on the in the guarantee and Solvency 1935 only since value organizations up the of had of bank to carry the of of the to supply We now again off and one the Reserve Reserve banking the and banks had was the Finance unable to prevent Furthermore, system. holiday had In that in place. had been financial 1933, of was Corporation, under the which was funds. a second Federal sustaining System after that crisis, System Reconstruction equity have "solvency" Federal of the reopening Once Crises the Federal collapse auspices able FDIC pointed examination. experience, the the FDIC at hazard Liquidity occurred the of the deposits. In that item unifying corporation, ability out bank by recently agenda the unfinished examination government J. Phillips experience Reserve bank and was not savings with a solvency a main player and loan crisis. in paying association 17 liabilities The at par. major placers were the insurance the main funds and the Treasury. Whereas inducing and not the and 1988-92. and offset assets The that so that the continued whose 1929-33 able to contain of non-performing which or characterized This infusion. bank infuses or insured equity government a failed into funds "equity" guaranteed are equity institutions, operation liabilities For often leads liabilities performing bank and the the are sell rapidly work-out the the of as is deemed route may even bank, the feasible. be a more is due to non-performing of the debtors of debtor, the equity debtor whose investment the failed infusion liabilities the bank bank if the management are and the route leaves responsible is replaced. route liquidator" failed assets government to often On both the leads assets situation. assets "government down of the intact, for the non-performing closes and bank, non treatment side route the organizations The failed as a work-out customer's valuable the to the not performing of the are both bank" investment "government bank. that of been investment enough was institutions. crises, an Reserve in crises a plethora requires worth up not and financial solvency Federal player off at par. The to to the solvency has a government puts institutions the due assets, net "liquidator" paid of either negative into were been crises Reserve of banks resolution non-performing has liquidity Federal crises that Reserve in resolving player on the books requires bank Federal containing main The by the forecloses failed The off on debtors, bank and "government effective assets pays way than bank depositors, and proceeds customers investment to deal with a "liquidator" as bank" a crisis route. 18 In the Finance aftermath Corporation (l/Z of the of placed banks that the bank equity holiday, As equity injection by the RFC was undone, equity interest in the out investments in failed to the of banks government recovery either by a yielded were no the of the the RFC's whole, the so that the increase in the recapitalization the of of funds permanent because sale the On banks place, by the sufficient nil: closed took repurchase earnings. occurred debt government or retained investment costs market Reconstruction l/3 of the in some reopened). the exercise. It seems as bankruptcies of are The based is a desirable issuing our currency Federal base States deposited is based supply System Depression, Banking United Reserve currency Reserve or The National banks the the in costs and whether in for an economy Banking Act Redux the a permanent Finance Reconstruction feature the of banks the where solvency to occur.17 National upon investigating as increase the to associations such bank, a permanent due loan It is worth likely 100% Money, be debt and savings investment Corporation, crises will weight period. government there dead government's 1988-1992 if Furthermore, Government "great private debts the liabilities offset by government by and war, Government deposit Office terminated great of the Federal Government The System. was provided at the upon upon Act of the bonds. the debt commercial a currency that bonds that of the Comptroller. bonds that experiment" monetized the in the government for the are by combination attenuation currency- by the basing the of of Today held of was the Federal the the Great revenue 1980's. is big and We can now enough savings have so that banks a banking the could be system in 19 which the Reserve and Banks the their a banks Federal equivalent Reserve are hold reserve which in the subject government bonds This and currency they The Federal to check, to would offset give are deposits are offset banks. Reserve at deposits, liabilities. by which Federal rapidly on new setting eexpect a moving We not forms. up debits expect the smart down by transferring card account. As transfer great to that us fully on the books conditions the vendor's money by the would way of for 100% money will the interest system that the open-access owners safety rate payment equally. on deposits pay for that system, and asset a which on the security of Such a account would in The was a world sebt system. that owned But goes of this with in place of the of principle in and swing to a fee-for- the system large a available be for the banks and may of of the payments may be no issue consideration to not be readily and to put treat registers" revolution costs of the would run resources. card costs form will government's fee-for-services would use we can the we the system check-clearing There system. except payments the "cash from credit but to take which systems The alternative public. to the to cover income-yielding system from as the way to pay the is to use a competetive choice, and payment soon of smart payment cards, value, power for to the general electronic the by electronically and payment by way purchasing where purchases encoded pay default-free services an to banking mean with discount One system. in make economy in our pockets of another, innovation an credit credits the vendor's one agent only currency of they towards on various form the Banks and bank and of their reserves are satisfied.18 We pay 100% in the assets commercial 100% interest-bearing to system monetary take equal currency money hold use can yield small the an asset choice in 20 favor of a discount combination to pay the One aspect of businesses systems and default and by business and favor of mutual households own portfolio. This in making through loans on the and terms to what As a substitute of special is a fixed-income would vehicle by value is in which fund These market Thus, lending, assets: 21st on the table such of now a mainly of generally down into that funds whether borrowing client. can be the province the flow of funds such that from there that is protected "protects" the fixed-income be have a first, say, 10% risk of private value would rate specialists of deciding tranches, a market are reading" loans would interest floating-rate as the with tranche the "hard a potential break financing These function, in the process that portion absorb all credits was be running on the basis of their accommodate portion tranche. performing which can are technique officer obtain funds variable-income also basis household variable-income loan for bank mutual and value financing of standard for finances that debts. the free the trends and upon both This paper principal are purchased their they and fund that which a based are assets financing the payments value. of equities mutual information, and value the vendor's information. Banks, business nominal debt from that Current becoming values for instruments fixed households business was that instruments debts. funds have on by household liabilities available a the system. schemes contingent holding and was to be divorced of have making services of the payments provision always for 100% money of the the indirect used costs fees and households accomplished the of so structured high of could expected losses that return due be finessed to the but non- by making credits. century during is about the 1930's to be ushered discussion in, an idea of reform can 21 once is again that it banking of can have and these too We now two are the capital as too much, payments that is held business is does fund, holders in the that not portfolio the loss of his need world, managements This to a greater spread that been has owners is by the of the debt. of 100% economy funds, of by and a government for the payment of financing way manager order an economy the responsible fund economy. set-up a portfolio in to of protect a mutual the A surrogate for bank high-expected-return tranche of principal. by corporate the wider dual and and secure that mutual mutual capital of scheme fund capital in the to be developed. In a capitalist is true monetary government as upon the the aware the position-taker, a high-risk, will such authority of hazard against form the money of a safe development is based weakness The system. by us to realize capital the 100% development as well liabilities that that it makes contingent-valued bonds functions the provision in a position mechanism of the functions little, financing money: the has to perform: payments, separating One virtue table. separates system means By be on the people's and portfolio extent One realized. public mostly way money managers now than albeit of wealth, broad other of is put of various ever before, in small protecting information widely at risk kinds. because of accumulations, today's asset disseminated: by transparency. Compartmentalization Like and every application transparency institutions and Transparency need and to usages. institutions by function, largely eroded. been of be for the 21st compartmentalization principles, adjusted The so prominent As we prepare Century for the realities compartmentalization in the for the 1935 21st of structure, century of has we have 22 to adjust the still-valid transparency to understanding of how our economy The and pension holding company funds we expect banking erased to be under will be under functional and century and that now same to of market the finance our allow commercial segmentation of of both banks umbrella, commercial company instruments Furthermore, companies. allows loans, of mutual operations corporate a holding automobile in the weight holders changed sales opened 21st increase has the the mortgages the format to co-exist the home loans, and compartmentalization functions. proximate and consumer mutual can as the primary banks of reflected funds reflecting the that of technology securitization an adjustment savings the of concepts and and format, commercial and which investment has virtually and investment banking. Legislation of the and administrative barriers implemented. geographical One the banking rich This paves the way in and often has Italy, made (in number of the eliminate banking are most now being elimination for the the British banking never of of capital-to-total of the so that can be allocated assets rule group. rule means dollars that in capital. exist in rule of as banker as a provides 10% or for 15% earnings, of and to any one credit. determines For such than retained of even structure, no more over systems, prudent regulatory capital, a banking 8 million branch The economy concentration organizations, arose. credits profits) ever-greater of national lO%-to-15%-of-capita1 habitat have been part of stagnation principle undistributed This the fringe of equity would branch a small distribution size wide that segmentation. into Germany the nation century mix thumb, to element past decisions example, the an natural eight-percent a 100 million-dollar The maximum loan credit bank line 23 of such an institution the American as its the maximum same dollar credit line The an and a and of smaller Every case therefore the banks, lines will each take large borrowers will credit small to that series in order that segments to million have a maximum banking a and increase the that small with can maximum likely of credit to of be natural number of credit a most will regional, to higher conditions banking businesses are to receive proceeds. The idea organizations support to be 12 large supply of outcome of place. of rules consolidation the 80 million- credit of supply to seems borrowers, if small special relative By to will of banks to fail, conditions 8 state, of progress is too big the improve is now taking A The an branch amalgamation line or less dollars. into A movement one of which so of In business. would nationwide maximum place. of million banks $l,OOO,OOO have line bank to $1,200,000. smaller will credit gates to with for bank to 1,200 to any one customer. habitats a bank billion-dollar of the amalgamation capital, the 100 opening banks. what is maximum of 800 million national given line a $800,000 is, any bank a 1 billion-dollar capital and be from as it now credit rule, dollars, see scene would for by bank adequate of special community size financing rules banks seems as well needs to as as be explored." VII. The time of structure changes mean now that economy the come banking underway much of has open and past we now have decades, a Proposal national financial in technology, of what the to A Modest inquiry system. computing, and may be obsolete. combined with The into the radical communication The the sluggish apparent 24 of reluctance can mean chance, with the needs In the financial that financing I National to were employment are not that what be in the result enough that structures Monetary full a consistent democracy. suggest should give structures changes and determine arrangements agenda. our financing serious banking board century Reserve of a progressive past, and the drawing policy Federal inquiries. public 20th the it is is time the monetary, the Commission 21st should of amiss to go serious in our back to financial, and A late century. be on the public 25 ENDNOTES rates and financial The strong reaction of interests 1. Reserve actions may markets after the modest early-1994 Federal well reflect an increase in uncertainty by agents of how these now more-complex the will work their through actions way For an argument about how monetary policy financial markets. operates by affecting uncertainty see Minsky, Hyman I?., "The New (179-191) in Minsky, Hyman P. (1982) Uses of Monetary Powers" "Can It Happen Again?", Armonk, N-Y.: M.E. Sharpe. Introduction to the French edition of Keynes, 2. Maynard, (1973) The General Theory of Employment Interest VII of Collected Works of Money, as reprinted in Volume Macmillan. Maynard Keynes, London and Basington: John and John This two-price-level interpretation of Keynes's non3. neutrality of money is stated in Minsky, Hyman P. (1975), John Columbia University Press, as well as in (1982) Maynard Keynes, One way Press. Stabilizing an Unstable Economy, Yale University of making the idea of the two price levels clear is to note that a capitalist economy has both a "CPI" and a "Dow Jones". long duration, but fairly may be of Turbulence 4. In the turbulent incoherence is almost always of short duration. dominated no more than great contraction of 1929-33, incoherence the last 10 weeks before the inauguration of Franklin Roosevelt. Decisive action by the government over the first hundred days of of reforms to come, combined with promises Roosevelt's term, ended the incoherence. The perspective on our economy to which the financial 5. leads has much in common interpretation of Keynes instability with the stress upon the evolutionary properties of capitalist such as enlightened the work of economists, that economies Schumpeter and the American institutionalists, who were prominent in the first half of this century. In the In the core case, profits equals investment. 6. plus the world as it is, gross capital income equals investment government deficit minus the international deficit of trade, with 26 corrections for savings out financed by capital income. of labor income and consumption Keynes visited the University of Chicago in 1931 to 7. lectures on Unemployment as participate in the Harris Foundation While in Chicago he noted that a preference for a World Problem. and persons. It liquidity was rampant among banks, businesses, seems that Keynes came to Chicago to sell the analysis of his quantity-theoretic Treatise on Money, and left Chicago with the General The revolutionary germ of his liquidity preference Theory. Fisher's 8. Econometrica. article appeared in the first (1993) volume of One aspect of the process of reform was the assembly, in 9. young the summer of 1934, by Jacob Viner of a gaggle of bright economists in the Treasury Department: they were labeled Viner's Their charge was to design a banking and financial Freshmen. One of these young economists was Laughlin system from scratch. Both of them were friendly another was Albert Hart. Currie; a doctrine usually associated with Henry toward 100% money, See Phillips, Ronnie J. Simons of the University of Chicago. The Chicago Plan and New Deal Banking Reform, (1994 forthcoming), Armonk, N.Y.: M.E. Sharpe. lie," is a "Entrepreneurs law, William Janeway's 10. about the determination of whether a project parallel statement of the institution of "security The importance is bankable. for the functioning of a transparent market based analysis" financial system is one reason why it is easier for a newly capitalist economy to replicate a universal banking system than a market based financial system. act replaced a currency The original Federal Reserve debt with one that monetized private that monetized government The period of the National Banking Act (1863 debts (and gold). The William characterized by falling prices. was to 1913) "Cross of Gold" speech was a response to the Jennings Bryan chronic deflation of the post- Civil War era. 11. If the trend decline in the ratio of government debt to 12. gross domestic product of 1946-1980 had continued through 1993, we would now be concerned about the shortage of government debt and we would be system, to satisfy the needs of the financial 27 debating what the structure should be of a banking and financial system in which the currency and the reserve base for deposits private reflect would Reserve Federal the furnished by obligations that the Federal Reserve obtains either from an open market or through the discount window. For the concept of a contained depression see Levy, S 13. Outlook for the 1990's: The Contained and David Levy (1991), Jay, Jerome Levy Economics Institute. Depression, For an explication of the relations between the composition and David Levy of aggregate demand and profits see Levy, S Jay, (1983) Profits and the Future of the American Economy, New York: Stabilizing an Hyman P. and Minsky, and Row, (1986), Harper Press. Unstable Economy, Yale University Recall that over 1929-33 the price level of current 14. output and the wage level of employed workers fell by about l/3; the Dow Jones, the second price level, fell by some 85%. Using crunches to contain demand is a form of policy 15. and bankers succeed as businessmen Crunches brinkmanship. The danger that the believe that their survival is at stake. central bank will carry the crunch too far and set off a debt deflation is always present. Work: 18. "New Deal's Unfinished Ronnie J. Phillips, 16. (1994), The American Banker, April Merging the bank regulators", In the light of the French and Italian experience with 17. investment banks, it is difficult to recommend a government government investment bank except for the possibility that in the of this bank will tend to be the activities United States transparent. Some of the main references for 100% money are: 18. Banking for Plan' "'The Chicago Albert Hart, (1935), and Statistics 2: 104-116. Reform," Review of Economics Irving (1945), 100% Money, 3rd Edition, New Haven: Fisher, The City Printing Company (First Edition 1935). and Currency Reform", Simons, Henry, et al (1933) "Banking Research in the Manuscript Reprinted in Warren Samuels, ed., History of Economic Thought and Methodology, Archival Supplement, Conn.: Jai Press, Forthcoming. Volume 4, Greenwich, 28 reference to Henry Simons is Economic Policy a Free Society, Chicago: the University of Chicago Press. The general 19. Phillips, Banking:" Institute. Minsky, and L. Public for B Papadimitriou, Ronnie Hyman P., Dimitri Randall Wray (1993) "Community Development Policy Brief no.3, The Jerome Levy Economics WORKING PAPER SERIES No. 1 Macroeconomic No. 2 The Firm and Its Profits...NINA No. 3 Competing Micro Economic Theories of Industrial MARK GLICK AND EDUARDO M. OCHOA No. 4 Housing Quality Differentials No. 5 The Finance Constraint No. 6 A Structural No. 7 Why is the Rate of Profit Still Falling?...THOMAS No. 8 The Effects of Alternative Sharing Arrangements on Employment: Preliminary Evidence from Britain...JEFFREY PLISKIN AND DEREK C. JONES No. 9 Consumer No. IO Profitability: Approach Theory and Evidence...THOMAS R. MICHL November SHAPIRO March 1988 Profits: An Empirical Approach in Urban Areas...DIMITRIOS A. GIANNIAS Theory of Money: A Progress Report...MEIR to Hedonic Equilibrium 1987 Models...DIMITRIOS March 1988 July 1988 KOHN August 1988 A. GIANNIAS R. MICHL August 1988 September 1988 September 1988 October 1988 Long-Term Trends in Profitability: The Recovery of World War II... GERARD DUMENIL. MARK GLICK AND DOMINQUE LEVY October 1988 No. 11 Ranking Urban Areas: A Hedonic Equilibrium DIMITRIOS A. GIANNIAS October 1988 No. 12 The Real Wage and the Marginal November 1988 No. 13 The Effects of Worker Participation, Employee Ownership and Profit Sharing on Economic Performance: A Partial Review...DEREK C. JONES AND JEFFREY PLISKIN November 1988 No. 14 Classical and Neoclassical Elements in Industrial Organization... MARK GLICK AND EDUARDO M. OCHOA December 1988 No. 15 The Financially Fragile Firm: Is There a Case for It in the 1920’s?... D.L. ISENBERG January 1989 No. 16 Unionization and Labour Regimes: A Comparison Between Canada and the U.S. Since 1945...DAVID KETTLER, JAMES STRUTHERS AND CHRISTOPHER HUXLEY January 1989 No. 17 Social Progress after the Age of Progressivism: The End of Trade Unionism the West...DAVID KETTLER AND VOLKER MEJA February 1989 No. 18 Profitability and the Time-Varying Liquidity Premium in the Term Structure of Interest Rates...TRACY MOTT AND DAVID ZEN March 1989 No. 19 A Dynamic Approach March 1989 No. 20 Profits, Cycles and Chaos...MARC No. 21 The Structure of Class Conflict in a Kaleckian-Keynesian No. 22 Debt and Macro Stability...MARC Benefit from Air Quality Improvements...DIMITRlOS Approach A. GIANNIAS to Quality of Life... Product of Labor...TRACY MOTT to the Theory of Effective Demand...ANWAR in SHAIKH JARSULIC JARSULIC April 1989 Model...TRACY MOTT April 1989 May 1989 WORKING PAPER SERIES -continued- No. 23 Viability and Equilibrium: ISLM Revisited...JEAN No. 24 Financial Instability: A Recession DORENE ISENBERG No. 25 Kaleckianism No. 26 Marx’s Value, Exchange JEAN CARTELIER No. 27 Money and Equilibrium: Two Alternative Activities...JEAN CARTELlER No. 28 The Covariance Transformation Fixed Effects Model...JEFFREY No. 29 Unionization and the Incidence of Performance-Based DEREK C. JONES AND JEFFREY PLISKIN Compensation No. 30 Growth Cycles in a Discrete, Nonlinear JARSULIC No. 31 The Changing No. 32 Simulation CARTELIER May 1989 on the U.S. Corporate Vs. “New” Keynesianism...TRACY Structure... MOTT June 1989 and Surplus Value Theory: A Suggested Modes of Coordination and the Instrumental PLISKIN Variables Model...MARC Role of Debt in Bankruptcy...DORENE June 1989 Interpretation.. of Economic Estimator of the in Canada... June 1989 June 1989 July 1989 August 1989 August 1989 September 1989 The Effects of Mergers on Prices, Costs, and Capacity Utilization in the U.S. Air Transportation Industry, 1970-84...FRANK R. LICHTENBERG AND MOSHE KIM November 1989 No. 33 What Remains of the Growth Controversy?...NANCY December 1989 No. 34 The Determinants of U.S. Foreign Production: Comparative Advantage...THOMAS KARIER January 1990 No. 35 Industrial De-Diversification FRANK R. LICHTENBERG January 1990 No. 36 The Microeconomics No. 37 What Happened No. 38 The Mathematics No. 39 Poverty and Household No. 40 A Kernel Regression No. 41 Generalized Entropy Measures of Long-Run Inequality Male Headed Households...SOURUSHE ZANDVAKILI No. 42 Poverty and Choice of Marital Status: A Self-Selection No. 43 International Comparison of Household Inequalities: with Decompositions...SOURUSHE ZANDVAKILI No. 44 Accounting for the Decline in Private Sector Unionization: Elections, Structural Change and Restructuring...THOMAS to the Corporate J. WULWICK Unions, Monopoly and Its Consequences of Monopoly ISENBERG for Productivity... Power...THOMAS Composition...JOAN of Phillips’ Data...NANCY April 1990 KARIER Profit Tax?...THOMAS of Economic Growth...NANCY Power, and May 1990 KARIER July 1990 J. WULWICK November 1990 November 1990 and Stability Among December 1990 Model...JOAN December 1990 December 1990 February 1991 R. RODGERS J. WULWICK and Y.P. MACK R. RODGERS Based on Micro Data Representation KARIER WORKING PAPER SERIES -continued- No. 45 Female-Headed Families: Why Are They So Poor?...JOAN No. 46 Redistribution No. 47 Financial Disturbances RICHARD SYLLA No. 48 The Economic Significance of Equity Capital: Lessons from Venture an Economist-Practitioner...WILLlAM H. JANEWAY No. 49 The Role of Banks Where Service Replication RICHARD ASPINWALL No. 50 How Useful Are Comparisons ALBERT GAILORD HART No. 51 Financial Crises: Systemic No. 52 Debt, Price Flexibility No. 53 A Critical Analysis of Empirical Studies of Transfers No. 54 Why the Ex-Communist Countries Economy...KENNETH KOFORD No. 55 The Measurement of Chronic and Transitory Poverty; with Application United States...JOAN R. RODGERS AND JOHN L. RODGERS No. 56 W(h)ither the Middle Class? A Dynamic View...GREG AND WILLARD RODGERS No. 57 Why Were Poverty No. 58 Social Security Annuities EDWARD N. WOLFF No. 59 The Health, Earnings Capacity, and Poverty of Single-Mother BARBARA L. WOLFE AND STEVEN HILL No. 60 Who Are the Truly Poor? Patterns of Official and Net Earnings Capacity 1973_1988...ROBERT HAVEMAN AND LARRY BURON No. 61 Changes in Earnings Differentials in the 1980s: Concordance, Convergence, and Consequences...MC KINLEY L. BLACKBURN, DAVID E. BLOOM AND RICHARD B. FREEMAN No. 62 The Changing Contributions Income, 1968_1988...MARIA PETER GOTTSCHALK No. 63 Wealth Accumulation of the Elderly in Extended Families in Japan and the Distribution of Wealth Within Japanese Cohorts by Household Composition: Analysis of the Literature...DAVID W. CAMPBELL Through Taxation: An International and Depressions: R. RODGERS March 1991 Comparison...SOlJRlJSHE The View from Economic ZANDVAKILI History... April 1991 Investing Has Eroded Institutional by Franchises... of Present Debt Problems With the 193Os?... or Idiosyncratic...HYMAN and Aggregate Stability...JOHN FAZZARI W. CAMPBELL Should Take the “Middle Way” to the Market and Transfers: Distributional April 1991 April 1991 CASKEY AND STEVEN April 1991 May 1991 June 1991 to the June 1991 J. DUNCAN, TIMOTHY Rates So High in the 1980s?...REBECCA April 1991 April 1991 P. MINSKY in Japan...DAVID April 1991 SMEEDING, M. BLANK July 1991 July 1991 and Tax Implications... July 1991 Families... July 1991 Poverty, of Men and Women to the Level and Distribution CANCIAN, SHELDON DANZIGER AND Causes, of Family July 1991 July 1991 July 1991 September A Critical 1991 WORKING PAPER SERIES -continued- No. 64 Market Processes and Thwarting Systems...PlERO No. 65 A Package of Policies to Permanently KENNETH KOFORD No. 66 The Transition FERRI AND HYMAN P. MINSKY November 1991 November 1991 P. MINSKY November 1991 No. 67 Employment Restructuring and the Labor Market Status of Young Black Men in the 1980s...DAVID R. HOWELL December 1991 No. 68 Transfer January 1992 No. 69 Reconstituting the United States’ Financial Issues...HYMAN P. MINSKY January 1992 No. 70 The Distributional Implications SOURUSHE ZANDVAKILI January 1992 No. 71 Macroeconomic Market Incentive Plans: History and Theoretical KENNETH J. KOFORD and JEFFREY B. MILLER January 1992 No. 72 The Capital Development HYMAN P. MINSKY January 1992 No. 73 Money, No. 74 The Financial No. 75 The Role of Unemployment No. 76 The ‘Chicago No. 77 Credit Markets and Narrow Banking...RONNIE No. 78 The Predication Semantics Model: The Role of Predicate Class in Text Comprehension and Recall...ALTHEA A. TURNER, PAUL B. ANDREASSEN, BRUCE K. BRITTON, DEBORAH McCUTCHEN No. 79 The Investment Decision of the Post Keynesian Firm: A Suggested Microfoundation Minsky’s Investment Instability Thesis...JAMES R. CROTTY and JONATHAN A. GOLDSTEIN No. 80 Growth and Structural No. 81 The Impact of Profitability, Financial Fragility and Competitive Regime Shifts on Investment Demand: Empirical Evidence...JAMES R. CROTTY and JONATHAN A. GOLDSTEIN No. 82 Job Quality and Labor Market Segmentation on the Effects of Employment Restructuring GITTLEMAN and DAVID R. HOWELL No. 83 Community Development Banks...HYMAN P. MINSKY, DIMITRI B. PAPADIMITRIOU, RONNIE J. PHILLIPS and L. RANDALL WRAY to a Market Economy: Increase Output Without Inflation... Financial Options...HYMAN and Life Cycle Wealth in Japan, 1974-1984...DAVID Instability Structure: Some Fundamental of the Tax Changes of the Economy Growth, Distribution W. CAMPBELL in the 198O’s... Rationale... and The Structure of Financial Institutions... and Prices in a Simple Sraffian Economy...MILIND Hypothesis...HYMAN in Triggering May 1992 Internal Labor Migration...GEORGE in China-US May 1992 P. MINSKY Plan’ and New Deal Banking Reform...RONNIE Change RAO MCCARTHY June 1992 J. PHILLIPS J. PHILLIPS Trade...HONG June 1992 July 1992 WANG in the 1980s: A New Perspective by Race and Gender...MAURY B. for August 1992 September 1992 September 1992 September 1992 March 1993 December 1992 WORKING PAPER SERIES -continued- No. 84 Migration of Talent: MILIND RAO Foreign Students and Graduate No. 85 The Relationship No. 86 The Origins of Money and the Development ...L. RANDALL WRAY No. 87 The Psychology No. 88 The Limits of Prudential Supervision: Economic and Competence...BERNARD SHULL No. 89 Profits for Economists...THOMAS No. 90 Narrow Banks: An Alternative No. 91 A Comparison of Proposals to Restructure R. ALTON GILBERT No. 92 The Current State of Banking Reform...GEORGE No. 93 Finance and Stability: No. 94 Productivity, Private and Public Capital, and Real Wage in the United States 1948-1990... SHARON J. ERENBURG May 1993 No. 95 The Community Reinvestment Development Banks...DIMITRI L. RANDALL WRAY May 1993 No. 96 Mortgage Default Among Rural, Low Income Borrowers...ROBERTO GEORGE W. MC CARTHY. MICHAEL A. STEGMAN No. 97 Is Health Insurance No. 98 Investment No. 99 Government Deficits, Liquidity ...L. RANDALL WRAY No. 100 Avoiding a Future of Unemployment and Low Wages: What Opportunities to Young Unskilled Workers?...ROBERT M. HUTCHENS No. 101 Technological Change and the Demand for Skills in the 1980s: Does Skill Mismatch Explain the Growth of Low Earnings?...DAVID R. HOWELL No. 102 Credibility of the lnterwar Gold Standard, Uncertainty, Great Depression...J. PETER FERDERER No. 103 Business Tax Incentives No. 104 The Anatomy of Changing of Determinants...ROBERT Between Economics Education Public and Private Investment...SHARON of the Modern Financial of Risk: A Brief Primer...PAUL in the US.. J. ERENBURG System ANDREASSEN Problems, February 1993 March 1993 Institutional Failure March 1993 April 1993 to Banking Reform...KENNETH SPONG the US Financial System... May 1993 P. MINSKY May 1993 Act, Lending Discrimination, and the Role of Community B. PAPADIMITRIOU, RONNIE J. PHILLIPS, and Crippling the Labor Market?...DOUGLAS and U.S. Fiscal Policy in the 1990s...STEVEN and Investment...THOMAS G. QUERCIA, HOLTZ-EAKIN FAZZARI and Schumpeterian April 1993 May 1993 G. KAUFMAN The Limits of Capitalism...HYMAN Preference, 1993 March 1993 KARIER Approach February Innovation Are Open and the KARIER Male Earnings Inequality: An Empirical Exploration H. HAVEMAN and LAWRENCE BURON June 1993 August 1993 October 1993 October 1993 October 1993 November 1993 January 1994 February 1994 February 1994 WORKING PAPER SERIES -continued- No. 105 The Collapse of Low-Skill Male Earnings in the 1980s: Skill Mismatch or Shifting Wage Norms?...DAVlD R. HOWELL March 1994 No. 106 The Role of Consistent Implementation of Policy: An Assessment of the Section 502 Low-Income Homeownership Program...GEORGE MC CARTHY, JR., ROBERTO QUERCIA and GABOR BOGNAR March 1994 No. 107 Economic inactivity of Young Adults: An Intergenerational and BARBARA WOLFE March 1994 No. 108 Community-Based PAPADIMITRIOU, No. 109 The Incidence of the Corporate ANTHONY J. LARAMIE Profits Tax Revisited: No. 110 Banking Industry Consolidation: GARY WHALEN Efficiency Issues...ROBERT No. 111 Banking Industry Consolidation: DANIEL E. NOLLE Past Changes and Implications No. 112 Business Strategies: Bank Commercial DONALD G. SIMONSON No. 113 Lines of Credit and Relationship and GREGORY F. UDELL No. 114 Banking in Transition...GEORGE No. 115 The Economic Consequences of Weintraub’s Consumption ANTHONY J. LARAMIE, JAN TOPOROWSKI No. 116 The Regulation and Supervision RONNIE J. PHILLIPS No. 117 Chief Executive Compensation Micro Data...TAKAO KATO No. 118 The Rhetoric of Policy Relevance No. 119 Liquidity, Uncertainty, and the Declining Predictive Power of the Paper-Bill J. PETER FERDERER, STEPHEN C. VOGT, RAVI CHAHIL No. 120 The Productivity Convergence Debate: A Theoretical ...BRUCE ELMSLIE and WILLIAM MILBERG No. 121 The Timing of Promotion to Top Management in the U.S. and Japan: A Duration Analysis...TAKAO KATO and LARRY W. TAYLOR No. 122 Recent Trends in U.S. Male Work and Wage Patterns: An Overview...LAWRENCE ROBERT HAVEMAN and OWEN O’DONNELL Analysis...ROBERT HAVEMAN Factoring Companies and Small Business Lending...DIMITRI RONNIE J. PHILLIPS and L. RANDALL WRAY A Post Keynesian B. April 1994 Approach... April 1994 DE YOUNG and April 1994 for the Future... Lending vs. Finance Company April 1994 April 1994 Lending... Lending in Small Firm Finance...ALLEN N. BERGER April 1994 E. FRENCH Coefficient...DOUGLAS of Bank Holding Companies: and Corporate April 1994 An Historical Perspective... Groups in Japan: New Evidence in International Economics...WILLIAM and Methodological MAIR, from May 1994 May 1994 May 1994 June 1994 MILBERG June 1994 Spread... Reconsideration June 1994 July 1994 BURON, August 1994 WORKING PAPER SERIES -continued- No. 123 The Utilisation of U.S. Male Labor, 1975-l 992: Estimates of Foregone LAWRENCE BURON. ROBERT HAVEMAN and OWEN O’DONNELL No. 124 Flying Blind: The Federal Reserve’s Experiment with Unobservables... DIMITRI B. PAPADIMITRIOU and L. RANDALL WRAY September 1994 No. 125 Profit Sharing and Gainsharing: A Review of Theory, Incidence DEREK C. JONES, TAKAO KATO and JEFFREY PLISKIN September 1994 No. 126 Financial Institutions, Economic Policy and the Dynamic Behavior of the Economy... DOMENICO DELLI GATTI, MAURO GALLEGATI and HYMAN P. MINSKY October 1994 No. 127 Financial Instability and the Decline (?) of Banking: HYMAN P. MINSKY October 1994 Work Hours... and Effects... Public Policy Implications... August 1994