A Simple Proposal to Resolve the Disruption of Counterparty Risk In Short-Term Credit Markets

Jan Kregel

Economics Policy Note Archive from Levy Economics Institute

Abstract: The impaired risk assessment caused by the collapse of mortgage-backed securities is the major problem threatening the stability of the American financial system, yet it is not clear that removing these assets from institutional balance sheets, as the government has proposed, will make it easier to assess counterparty risk in short-term credit markets. Resolving the disruption of counterparty risk should be the first objective of policy, argues Senior Scholar Jan Kregel, since these markets provide basic liquidity support for institutions operating in the broader financial markets.

Date: 2008-10
New Economics Papers: this item is included in nep-pke and nep-ure
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