Langley liquidity lost; the governance of the global financial crisis (2015)

Liquidity Lost Liquidity Lost The Governance of the Global Financial Crisis Paul Langley Great Clarendon Street, Oxford, OX2 6DP, United Kingdom Oxford University Press is a department of the University of Oxford It furthers the University’s objective of excellence in research, scholarship, and education by publishing worldwide Oxford is a registered trade mark of Oxford University Press in the UK and in certain other countries # Paul Langley 2015 The moral rights of the author have been asserted First Edition published in 2015 Impression: All rights reserved No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior permission in writing of Oxford University Press, or as expressly permitted by law, by licence or under terms agreed with the appropriate reprographics rights organization Enquiries concerning reproduction outside the scope of the above should be sent to the Rights Department, Oxford University Press, at the address above You must not circulate this work in any other form and you must impose this same condition on any acquirer Published in the United States of America by Oxford University Press 198 Madison Avenue, New York, NY 10016, United States of America British Library Cataloguing in Publication Data Data available Library of Congress Control Number: 2014938486 ISBN 978–0–19–968378–9 Printed and Bound by CPI Group (UK) Ltd, Croydon, CR0 4YY Links to third party websites are provided by Oxford in good faith and for information only Oxford disclaims any responsibility for the materials contained in any third party website referenced in this work For Grace and Tom Preface Sparked by the first months of the contemporary global financial crisis, the project that became this book began over six years ago The initial focus for the project was upon the performativity of crisis management; that is, how reiteratively naming and acting on the crisis as one of ‘liquidity’ served to affirm and keep in place the prevailing organization of global financial markets I was interested in how the rendering of the crisis as a technical matter of money market liquidity enabled governance that treated the crisis as a temporary blip, as a momentary pause in three decades or so of global financial innovation centred on Wall Street and the City of London In early 2008, I applied for a Visiting Fellowship to study liquidity at Durham University’s Institute of Advanced Study (IAS), with a view to contributing to the IAS 2009–10 research theme of ‘Water’ I was very fortunate that my application for an IAS Fellowship was successful The Institute provided a wonderful research environment during the winter months of 2010 However, much had changed in between times The crisis entered a period of such intensity in the autumn of 2008 that the edifice of global finance genuinely appeared to be on the brink of collapse From the point of view of my project, the spiralling crisis produced a sprawling array of crisis governance initiatives that went far beyond the so-called ‘liquidity injections’ of the central banks By June 2009, for instance, the Bank of England calculated that the cost of the complex and multiple public commitments made in the course of crisis management in the United States, United Kingdom, and Eurozone already ran to US$14 trillion, equivalent to around half of the combined annual gross domestic product (GDP) of these economies Given that crises of banking and finance are typically defined in economic theory and market practice as liquidity crises, it was especially revealing that the contemporary crisis could not be contained through the terms and techniques of liquidity The loss of liquidity proved to be much more than merely an abrupt and momentary halt to global financial circulations that was amenable to the long-established last resort lending facilities of the central banks When liquidity was lost in the contemporary crisis, that which made the flows of global finance possible—narratives, confidences, business models, monetary policies, regulatory policies, and so on—also unravelled and ruptured As it Preface transpired, then, the Visiting Fellowship at Durham’s IAS provided an opportunity for me to pause and reconsider the parameters of my project, and to so amid the ongoing struggle to control the crisis I would like to thank Susan J Smith for encouraging my application to the Water theme, and the IAS Directors and the other Visiting Fellows of 2009–10—especially Ash Amin, Colin Bain, Stefan Helmreich, and Marilyn Strathern—for our conversations The completion of Liquidity Lost is the result of the support I have subsequently received from a large number of people Most recently, since October 2011, I have benefitted greatly from the rich intellectual environment provided by my colleagues and students at the Department of Geography, Durham University, and a period of research leave from teaching and administrative duties within which to complete the book Thanks are also due my previous colleagues at the University of York and Northumbria University Jacquie Best, Donncha Marron, and three anonymous advisers provided very helpful feedback on my initial attempts to write an introductory chapter, and to frame the book’s enduring contribution David Musson from Oxford University Press again showed great faith in my work, and Clare Kennedy ensured that the book passed through the final stages The fieldwork that contributed towards this book included a total of twentytwo research interviews Representatives of HM Treasury, the Financial Services Authority, and the commercial banking and investment management industries provided interviews in London during September 2011 Representatives of the Federal Deposit and Insurance Corporation, Federal Reserve Bank of New York, New York Times, Securities and Exchange Commission, and the banking, fund management, and securitization industries provided interviews in New York and Washington, DC, during March 2012 Confidentiality prevents me from thanking the individuals concerned I hope this book does justice to the understandings and sharp insights that they were kind enough to share with me Many draft papers, individual chapters, and less formal presentations upon which this book is based have been delivered in various settings since 2008 These have included: Association of American Geographers annual conferences in 2009, 2012, and 2013; the 2008 CRESC Annual Conference, and the CRESC conference on ‘Finance in Crisis/Finance in Question’ in 2010; conferences of the Critical Finance Studies network, hosted by University of Amsterdam (2010) and Stockholm Business School (2013); a number of workshops and seminars hosted by the Department of Politics and International Studies, Warwick University, most notably, ‘Political Economy of the Sub-Prime Crisis’ (2008) and ‘Financial Resilience in the Wake of the Crisis’ (2013); ‘Political Economy, Financialization, and Discourse Theory’, Cardiff University Business School, 2009; the Social Studies of Finance Association Conference held in Paris in 2010; the Royal Dutch Academy of Science viii Preface Interdisciplinary Summer Course of 2010, organized by Ewald Engelen of the University of Amsterdam; the School of Geography Seminar Series, Nottingham University, 2011; ‘Economization of Uncertainty’, University of Helsinki, 2011; ‘Understanding Crisis in Europe Workshop’, University of Bristol and University of the West of England, 2012; ‘Methodologies of Everyday Life and International Political Economy’, University of Copenhagen, 2012; ‘Temporalities of Debt and Guilt’, COST Action ISO902 Workshop, University of Hamburg, 2012; and ‘Regulation, Law Enforcement and the Financial Crisis’, Max Planck Institute for Foreign and International Criminal Law, 2012 I would particularly like to thank the following people for their invitations to speak, supportive comments, questions, provocations, and private correspondence: Ben Anderson, Thomas Bay, Nina Boy, James Brassett, Chris Clarke, Stephen Collier, Adam Dixon, Ismail Erturk, Shaun French, Daniela Gabor, Csaba Gyoery, Marieke de Goede, Joyce Goggin, Sarah Hall, Eric Helleiner, Laura Horn, Mark Kear, Turo-Kimmo Lehtonen, Martijn Konings, Andrew Leyshon, Bill Maurer, Randy Martin, Liz McFall, John Morris, Ben Rosamond, and Hugh Willmott Earlier versions of some of the material contained in the book has also been published previously: ‘The performance of liquidity in the sub-prime mortgage crisis’, New Political Economy, 15, 1: 71–98 (doi:10.1080/13563460903553624); ‘Toxic assets, turbulence, and biopolitical security: Governing the crisis of global financial circulation’, Security Dialogue, 44, 2: 111–26 (doi:10.1177/ 0967010613479425); and ‘Anticipating uncertainty, reviving risk? On the stress testing of finance in crisis’, Economy and Society, 42, 1: 51–73 (doi:10.1080/03085147.2012.686719) In all cases, the journal editors and anonymous reviewers who commented on my submissions pushed me to tighten up my arguments in the course of publication, so I would like to express my gratitude to them The author would also like to thank Taylor & Francis and Sage for permission to reproduce copyright material My final words of thanks must go to my family: Lou, Grace, and Tom This book has benefitted immeasurably from Lou’s knowledge of social theory and burgeoning book collection, as well as her unwavering love and support She also knows a thing or two about the logic of the derivative Grace has moved into double-digits during the time that it has taken to complete this book She is kind, wise, and, thankfully, very patient My enduring memory of the 2008 high point of the global financial crisis will always be of watching it unfold on late-night television news, accompanied only by our newborn son Tom He has since had to ask, on far too many occasions, ‘have you finished your book yet, Dad?’ PL ix Bibliography O’Brien, J (2011) ‘Insurance, risk and the limits of sentimental representation’, Journal of Cultural Economy, 4, 3: 285–99 O’Connor, J (1973) The Fiscal Crisis of the State, New York: St Martin’s Press Office of Management and Budget (2010) Budget of the US Government, February, Washington, DC: US Government Printing Office Available at: (accessed June 2014) Office of Management and Budget (2011) Living Within Our Means and Investing in the Future: The President’s Plan for Economic Growth and Deficit Reduction, September, Washington, DC: Office of Management and Budget Available at: (accessed June 2014) Office of Management and Budget (2009) A New Era of Responsibility: Renewing America’s Promise, February, Washington, DC: US Government Printing Office Available at: (accessed June 2014) O’Malley, P (2000) ‘Uncertain subjects: Risks, liberalism and contract’, Economy and Society, 29, 4: 460–84 O’Malley, P (2009) ‘Uncertainty makes us free: Liberalism, risk and individual security’, Behemoth: A Journal of Civilization, 2, 3: 24–38 Ong, A and Collier, S.J (eds) (2004) Global Assemblages: Technology, Politics, and Ethics as Anthropological Problems, Oxford: Wiley-Blackwell Osborne, G (2010) ‘Speech at the Lord Mayor’s dinner for bankers and merchants of the City of London’, Mansion House, London, 16 June Available at: (accessed June 2014) Osborne, G (2011) ‘Speech at the Lord Mayor’s dinner for bankers and merchants of the City of London’, Mansion House, London, 15 June Available at: (accessed June 2014) Osborne, G (2013) ‘Speech at the Lord Mayor’s dinner for bankers and merchants of the City of London’, Mansion House, London, 19 June Available at: (accessed June 2014) Panetta, F., Faeh, T., Grande, G., Ho, C., King, M., Levy, A., Signoretti, F.M., Taboga, M., and Zaghini, A (2009) An Assessment of Financial Sector Rescue Programmes, BIS Papers No 48, July 2009 Available at: (accessed June 2014) Parliamentary Commission on Banking Standards (2013) Changing Banking for Good— Report of the Parliamentary Commission on Banking Standards, Volume I: Summary, and Conclusions and recommendations, June, London: The Stationery Office Available at: (accessed June 2014) 206 Bibliography Partnoy, F (2004) Infectious Greed: How Deceit and Risk Corrupted the Financial Markets, London: Profile Books Pasanek, B and Polillo, S (2011) ‘After the crash, beyond liquidity’, Journal of Cultural Economy, 4, 3: 231–8 Paulson, H (2010) On the Brink: Inside the Race to Stop the Collapse of the Global Financial System, London: Headline Publishing Group Paulson, H (2008b) ‘Statement by U.S Treasury Secretary Henry Paulson following the meeting of the G7 finance ministers and central bank governors’, 10 October, Washington, DC Available at: (accessed June 2014) Paulson, H (2008c) ‘Statement by Secretary Henry M Paulson, Jr on actions to protect the U.S economy’, 14 October Available at: (accessed June 2014) Paulson, H (2008a) ‘Turmoil in US credit markets: Recent actions regarding government sponsored entities, investment banks and other financial institutions’, Banking Committee, US Senate, 23 September Available at: (accessed June 2014) Peck, J (2012) ‘Austerity urbanism’, City: Analysis of Urban Trends, Culture, Theory, Policy, Action, 16, 6: 626–55 Peck, J (2013a) ‘Explaining (with) neoliberalism’, Territory, Politics, Governance, 1, 2: 132–57 Peck, J (2013b) ‘Pushing austerity: State failure, municipal bankruptcy and the crises of fiscal federalism in the USA’, Cambridge Journal of Regions, Economy and Society, 7, 1: 17–44 Peckham, R (2013) ‘Economies of contagion: Financial crisis and pandemic’, Economy and Society, 42, 2: 226–48 Pierson, P (2001) ‘Coping with permanent austerity: Welfare state restructuring in affluent democracies’, in P Pierson (ed.) 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15 Asset Purchase Facility (APF), Bank of England 43 Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (AMLF), Federal Reserve 42 asset-backed securities (ABS) 43 austerity 2, 6, 149–52, 159–66, 172, 175 and liberal/neo-liberal economic thought 161 Conservative-Liberal coalition government programmes, UK 147–8, 150, 155, 156, 158, 162, 163–4, 165 Obama administration fiscal discipline, US 151–2, 154–5, 157, 158, 159–60, 163, 165 Australian central bank, liquidity injections 38 Austrian financial crisis (1931) 31 ‘bad banks’ 61, 64–6, 93, 174 Grant Street 72 Retriva 72 Securum 72 and toxicity 71–6 Bagehot, Walter 14, 15, 26, 28, 49, 50–1, 52, 64, 92 Banco Santander 84 bank balance sheets 81–2, 86–91, 93, 94, 100 and sub-prime assets 70–1 and toxicity 70–1 Bank for International Settlements (BIS) 47, 127, 157 Bank Holding Company Act, Section 13 128 Bank of America 64, 66, 85–6 Bank of England 37, 38, 112, 133, 138, 170 Asset Purchase Facility (APF) 43 and bank balance sheets 55–6, 87–8 base money 54–6 Financial Policy Committee (FPC) 33, 133 Funding for Lending scheme 99 interest rate cuts 39–40 liquidity injections 42–3, 55–6 and LOLR concept 14–15, 53 macro-prudential regulatory agenda 119 ‘market-maker of last resort’ 15 Monetary Policy Committee 40 Prudential Regulation Authority (PRA) 133 QE programme 43, 160 securities lending 40 size of bank bailouts 96 Special Liquidity Scheme (SLS) 40, 52, 83 Bank of Japan: liquidity injections 38 and QE 44 Bank Recapitalization Fund (BRF), UK 81, 82–4, 86, 89, 94, 95, 96, 97, 177 bank runs 37, 95 Banking (Special Provisions) Act (2008), UK 92–3 Banking Act (1933), Regulation Q, US 140 banking and social utility 124–5 Banking Reform Law (2013), UK 126 bankruptcy and foreclosure procedures 161–2 Baring, Sir Francis 14 ‘base money’ 38, 53–6 Basel Committee on Banking Supervision (BCBS) 47, 109, 119 I 90–1, 101 II 47, 91, 108 III 47, 91, 110, 117–18, 125–6, 142, 180 Index Bear Stearns 36, 41, 52, 60, 61, 62–4, 67, 70, 72, 73, 75–6, 78 n.2 behavioural economics 9–10, 111 Bernanke, Ben 16, 41, 44, 49, 51, 59 n.21, 62–3, 74, 75, 81, 82, 89, 114, 115, 131–2, 133, 136, 169, 170, 171 Bischoff, Sir Winfried 137 ‘Black Friday’ (1866) 37 BlackRock 64, 65 Blinder, Alan 104, 114, 115 BNP Paribas 36, 60 Bocconi University, Milan 164–5 bond rating agencies 67 bonuses 138 Borio, Claudio 47 Bradford & Bingley 84 Bretton Woods system 31, 53 Brown, Gordon 98–9 Brown administration, UK 149 Budget Control Act (2011), US 152, 158 Buffett, Warren 60 Bush, George W 72, 76 Bush administration, US 152 Cameron, David 150, 156, 157, 162, 163–4 Canadian central bank, liquidity injections 38 Capital Assistance Program (CAP), US 85–6, 103 Capital Purchase Program (CPP), US 85–6, 94, 96–7, 99, 100, 103 central banks 37, 38 ‘balance sheet policies’ 40, 55–6 base money 53–6 and the hierarchy of monetary governance 18, 19 liquidity from liquidity injections and OMOs 39–41 swaps network 42 and US Treasury bonds 160 Chicago Board Options Exchange Volatility Index (VIX) 75 Citibank 84 Citigroup 36, 37, 66, 70–1, 85–6 collateralized debt obligations (CDOs) 36 Commercial Paper Funding Facility (CPFF), Federal Reserve 42 complex adaptive systems theory 112, 122 n.6 confidence 27–9, 50–1, 176–8 Congressional Budget Office (CBO), US 156 Congressional Oversight Panel, US 99, 107 Conservative-Liberal coalition government, UK austerity programmes 150, 155, 156, 157, 158, 162, 160, 163–4, 165 welfare reform savings 150, 163–4 Consumer Financial Protection Bureau, US 133 Continental Illinois 71–2, 134 Credit Default Swaps (CDS) 36, 69–70, 79 n.11, 97, 132 216 Crockett, Andrew 110–11 cultural economy approaches 2–3, 5, 7–8, 13, 21–2, 24, 27, 32, 33–4, 59 n.19, 87, 170–1, 176, 177, 180–1 Darling, Alistair 82, 93 debt 6, 146–67 austerity, redemption and confidence 159–66 austerity measures 149–52 dilemma 153–9 risks 69–70, 91 ‘debt ceiling’ (2011), US 152 Deleuze, Gilles 20, 21, 22, 27, 32, 34, 48–9, 53, 86, 110 Dillon, M 24 discount windows 15, 38, 53, and liquidity injections 39, 57 n.5 US Federal Reserve 40–2, 51–2, 63 dispositif of crisis governance 21–2, 26, 34 n.5; see also ‘apparatus of security’ Dodd-Frank Wall Street Reform and Consumer Protection Act (2013), US 118, 126, 128, 133, 144 n.5 double-entry bookkeeping 55, 87, 89, 93 Dow-Jones Industrial Average 159 economic science approaches 9, 13–19 economics, see behavioural economics; Keynesian economics; Marxist political economy; post-Keynesian economics ‘economization’ economy and economics at large 25–6, 175–6 Elliott, Larry 162 Emergency Economic Stabilization Act (2008), US 65, 74, 77, 85, 93 European Banking authority (EBA) 120 European Central Bank (ECB), and liquidity injections 38 European Union (EU): banking reform 127 macro-prudential stress-testing 119–21 TAF support 42 Eurozone sovereign debt crisis 157–8 Fannie Mae, US 43, 84, 96 Federal Reserve, US 16, 37, 38, 170 agency securities 43 and AIG 64–5 and balance sheets 55–6 and base money 54–6 and Bear Stearns 62–4 Comprehensive Capital Analysis and Review (CCAR) 118–19 Deposit Insurance Corporation (FDIC) 71–2, 84, 86, 95, 134, 137, 138 discount window 40–2, 51–2, 63 Index interest rate cuts 39 and liquidity injections 38, 49, 55–6 Maturity Extension Program (‘Operation Twist’) 44 and OMOs (2008) 41, 44 Open Market Committee 39 Primary Dealer Credit Facility (PDCF) 41–2 QE1 programmes 43, 61, 66 QE2 programmes 44, 160 securities lending 40 swaps network 42 Term Asset-Backed Securities Loan Facility (TALF) 43 Term Auction Facility (TAF) 41, 42, 52 Term Securities Lending Facility (TSLF) 40, 41, 52, 63 Federal Reserve Act, Section 13(3), US 41–2, 63, 73 ‘fiat money’ 53–6 Financial Crisis Inquiry Commission (FCIC), US 133, 138 financial innovation 124–5 ‘financial instability hypothesis’ 17–18 Financial Planning Committee, UK 110 Financial Service Act (2012), UK 133 Financial Services (Banking Reform) Act (2013), UK 131 Financial Services Authority (FSA), UK 81, 124, 133 Financial Stability Board (FSB), US 110 Financial Stability Oversight Council (FSOC), US 128, 133 ‘fire sales’ 42 Fiscal Responsibility Act (2010), UK 150 Foucault, Michel 27, 29, 31, 34, 54–5, 74, 127 and dispositif 21–2, 26, 34 n.5 and power modalities 23, 24 and problematization 5, 13, 19–21, 33–4, 172 Freddie Mac, US 43, 84, 96 Friedman, Milton 95 conceptualizing 21–33 mapping of 19–21 media accounts of 13–14 and political economy approaches 13–19 problems and solutions Tab Global Financial Stability Report (2009), IMF 12 ‘global liquidity’ 45 gold standard 53 Goldman Sachs 85 Gramm-Leach-Bliley Act (1999), US 125, 144 n.2 Grant Street ‘bad’ bank 72 Great Depression (1930s) 31, 49 ‘Great Moderation’ 32 Greece 147 government bonds 157 sovereign debt 120, 121, 147 Greenspan, Alan 16, 102, 103 Guattari, Felix 20, 21, 27, 48–9, 53, 86 G-7 82, 85 G-20 165 G-30 report (2009) 127, 128 ‘Geddes Axe’ (1921) 150 Geithner, Timothy 62, 63, 67, 68, 75–6, 105, 114 General Motors Acceptance Corporation (GMAC), US 106 German financial crisis (1931) 31 gilts, UK treasury 93, 159, 160 Glass–Steagall Act (1933), US 136, 138, 140, 141, 143, 144–5 n.9 Global Financial Crisis (GFC) governance 12–35, 169–81 Anglo-American lead 1–2, 4, 7, 10–11 JP Morgan Chase 64, 67, 84, 108, 129 Haldane, A G 135, 141 Halifax Bank of Scotland (HBOS) 83, 84 Harvey, William 68 hedge funds 36, 60, 62 Hobbes, Thomas 54, 68 Hoover administration, US 165 Hume, David 154, 161 Independent Commission on Banking report (2011), see Vickers Report IKB Deutsche Industriebank 36–7 interest rates cuts 39–40 and ‘liquidity premium’ 45 International Accounting Standard 39 (2005) 68–9 International Monetary Fund (IMF) 12, 69, 82, 90, 155, 156 Financial Sector Assessment Program 111 Global Financial Stability Report (2008) 80 Keynes, John Maynard 17, 28, 34 n.1, 50–1, 111 Keynesian economics 9, 26, 165 deficit spending 146, 151 liquidity 46–7 planning 53–9 see also post-Keynesian economics Keynesian macroeconomics 31 ‘Keynesianism, global’ 149, 150 King, Mervyn 82, 97 Kluwer, Walters 73–4 Knight, Frank 112 Kohn, Donald L 65, 76 217 Index Labour government (UK), value added tax reduction (2008) 149 laissez faire Lehman Brothers 64, 80 lender of last resort (LOLR) concept 16, 17–18, 19, 52, 53, 56, 37, 170, 173 Bank of England as 14–15, 53 leverage ratios of banks 89–90 liberal economic theory 148 liberal thought 26 liberalism, classical Liikanen Report (2012), EU 127 liquidity 6, 7, 36–56, 67, 177 base money and balance sheets 52–6 and confidence 50–1 coverage ratio 47 discourses, devices and desires 44–52 ‘injections’ 2, 37, 38–44 as laissez-faire model of equilibrium and circulation 45 ‘market’ 46 metaphor of 44–52 ‘premium’ and interest rates 45 ‘risk’ 47, 48, 49–50, 69 Lloyds Banking Group 83 Lloyds TSB 84 Locke, John 161 London Interbank Offered Rate (LIBOR) 50, 131 OIS spreads (2008–9) 50, 51 Long-Term Capital Management 108 Lowenstein, Roger 84–5 macro-prudential approaches to risk 11, 32–3, 91, 104, 110, 111–12, 117, 119, 126, 132, 133–4, 167, 175, 177, 179, 180–1 distinction from micro-prudential 110–11 stress-testing 111–12, 114–16, 118–21, 122, 123 n.7, 177, 180 Maiden Lane LLC (I, II and III ‘bad banks’), Federal Reserve, US 64–5, 67, 72, 73–4, 75 ‘market discipline’ of banking 131, 132 market fundamentalism ‘market liquidity’ 46 ‘marketization’ Marxist political economy approaches 17, 18–19, 34 n.3 May, R M 135, 141 Mellon Bank, US 64, 72 Merrill Lynch 64, 70 Mexican financial crisis 15 micro-prudential approaches 110–11 Miller, Peter 7, 87 Millo, Yuval 116 Minsky, Hyman 17–18, 111 on liquidity 47 218 modes of power, and sovereign techniques 23–5, 27, 173–4 modulation and mitigation mechanisms 31–3, 179–81 monetary policy 31–2, 54 Money Market Investor Funding Facility (MMIFF), US Federal Reserve 42 money markets, US dollar funding 42–3 ‘moral hazard’ concept of 15–17 Morgan Stanley 85 mortgage-backed securities (MBS) 36, 64 National Commission on Fiscal Responsibility and Reform (2010), US 151, 157 neo-liberalism 26, 29, 176 economic policies and sovereign debt 153–9 and US monetary policy 54 Nietzsche, Friedrich Northern Rock 37, 83–4, 92, 95 Obama, Barack 103, 127, 128, 134, 147, 154–5 Obama administration, US 66, 85, 104–5, 114, 147 and fiscal discipline (austerity) 151–2, 154–5, 157, 158, 159–60, 163, 165 ‘obligatory passage points’ 20 Occupy Wall Street (OWS) movement 4–5 Office for Budget Responsibility (OBR), UK 156 Office of Financial Stability, US 65 oikonomia 9, 25, 163 open market operations (OMOs) 15, 38, 53, 56, 57 n and central bank liquidity injections 39–41 and US Federal Reserve 44 ‘originate-and-distribute’ model 48, 69, 89, 107–8 Osborne, George 130, 133, 146–7, 148, 156 Overend Gurney 37 Paulson, Henry (‘Hank’) 65, 66, 67, 85, 94–5, 96–7, 98 ‘Paulson Plan’, US 74, 84, 85 ‘performative’ accounting 87–8 political economy, and GFC governance 13–19 post-Keynesian economics 26, 54 and GFC governance 17–18, 19 and liquidity 47–8 President’s Economic Recovery Advisory Board (PERAB), US 127, 128 Prince, Chuck 36, 37 problems and problematization 5, Tab 1, 7–8, 13, 19–21, 22, 33–4, 172 Prudential Regulatory Authority (PRA), UK 119 Public-Private Investment Program (P-PIP, 2009), US 66 Index quantitative easing (QE) programmes 4, 37–8, 174 Bank of England 43, 160 US Federal Reserve 43, 44, 61, 66, 160 Rancière, Jacques 4, 142, 172 RBS bailout 136 recapitalization 92–3 Bank Recapitalization Fund, UK 81, 82–4, 86, 89, 94, 95, 96, 97, 177 see also Troubled Asset Relief Program (TARP), US regulation 4, 6, 7, 124–43 ‘invisible hand’, pre-crisis 131–2, 136–7 problem of 131–8 solutions of Volcker and Vickers 138–42 structural, in Anglo-American banking 127–31, 136–7 see also Basel Committee on Banking Supervision (BCBS) ‘regulatory arbitrage’ 90 Republican Party (US), and tax cuts 147 Resolution Trust Corporation (RTC) 72 Retriva ‘bad bank’ 72 Ricardian equivalence 164 risk 6, 7, 30, 102–22, 180 calculations 67 CAP/CPP program 103 and complex adaptive systems theory 112 and debt 69–70, 91 macro-prudential approaches 11, 32–3, 91, 104, 110, 111–12, 117, 119, 126, 132, 133–4, 167, 175, 177, 179, 180–1 macro-prudential stress-testing 111–12, 114–16, 118–21, 122, 123 n.7, 177, 180 management 103, 107–14 and ‘moral hazard’ 15–17 and the Supervisory Capital Assessment Program (SCAP), US 103–7, 108, 109, 113–17, 118, 120, 121–2, 123 n.7, 177 ‘value-at-risk’ (VaR) models 91, 108–10, 111, 112, 113, 118, 121, 180 Roosevelt, Franklin D 145 n.9 Royal Bank of Scotland (RBS) 83 Ryan, Paul 151–2 Sarkozy, Nicolas Say’s Law 154, 164 Scholes, Myron 109 Schumpeter, Joseph 87 Securities Exchange Commission (SEC), UK 81 Securum ‘bad bank’ 72 self-regulation shadow banking sector 39, 64, 89 and the ‘originate-and-distribute’ model 48 Simmel, Georg 29, 35 n.9, 68 Smith, Adam 95, 154, 161 social studies of finance (SSF) approaches 2–3, 5–6, 10, 170–1 sociology, and financial markets behaviour 10 ‘sociology of translation’ 20 solvency 6, 7, 80–100 Bank Recapitalization Fund, UK 82–4, 86, 89, 94, 95, 96, 97 and banking balance sheets 86–91 and banking confidence 94–9 banks capital requirements 90–1 Capital Purchase Program (CPP), US 85–6, 94, 96–7, 99, 100 ‘performative balance sheets’ 87–8 and sovereign treasury institutions 92–3 Sombart, Werner 87, 89 Soros, George 74 sovereign debt 7, 120, 146–8 and classical economic thinking 153–9 ‘crowding out’ concept 154, 155 Eurozone 168 n.8 and Keynesian economic planning 153–9 and neo-liberalism 153–9 and ‘Ricardian equivalence’ 154 US downgrading 158–9 sovereign fiscal authority 147 hierarchy of monetary governance 18–19 as LOLR 17–18, 19 and market balance sovereign power 23 sovereign regulatory techniques 139–40, 159, 161 base money 53–4, 56 and modes of power 23–5, 27 and ‘unredeemable debt’ 54–5 ‘sovereignty-discipline-biopolitics’ 24 Special Liquidity Scheme (SLS), Bank of England 40, 52, 83 Spending Review (2010), UK 160 Standard & Poor’s rating agency 158 , 159 stress-testing, macro-prudential 111–12, 114–16, 118–21, 122, 123 n.7, 177, 180 Structured Investment Vehicles (SIVs) 39, 64 sub-prime assets 69 and bank balance sheets 70–1 as toxic 66–7 valuing 74–5 sub-prime mortgage market, US 36, 60, 69–70, 125, 171–2 Supervisory Capital Assessment Program (SCAP), US 103–7, 108, 109, 113–17, 118, 120, 121–2, 123 n.7, 177 swaps network, and central banks 42 Swedish banking collapse 72 ‘systemic distress’ 16–17 ‘systemic risk’ 32, 69, 103, 108, 120 and LOLR justification 16–17 219 Index Taleb, Nassim Nicholas 109, 112 Tarullo, Daniel K 129 Tea Party, US 151 ‘TED spread’ 49–50 Temporary Lending Guarantee Program, US 86 Term Asset-Backed Securities Loan Facility (TALF), US Federal Reserve 43 Term Auction Facility (TAF), US Federal Reserve 41, 42, 52 Term Securities Lending Facility (TSLF), US Federal Reserve 40, 41, 52, 63 Tett, Gillian 72 Thatcher, Margaret 162 Thornton, Henry 14, 15 Tier capital 82–3, 90, 101 n.1, 105, 106–7, 113 Tier capital 90 Tietmeyer, Hans 110 ‘too big to fail’ 16, 126, 134–6 ‘too interconnected to fail’ 70 and Bear Stearns 63 toxicity 6, 7, 15, 60–78 and bad banks 71–6 and bank balance sheets 70–1 bloodstream analogy 68, 75–6 metaphor and discourse 66–71 valuing sub-prime assets 74–5 transferable claims 30, 38, 52, 56, 67, 69, 75, 78, 107, 111, 153, 171 Trichet, Jean-Claude 102 Troubled Asset Relief Program (TARP), US (2008) 43, 61, 64, 65–6, 67, 70, 72, 78, 81, 85, 93, 99, 107, 172 220 and AIG 64–5 Automotive Industry Financing Program 106 and Bear Stearns 62–4 funding 73–6, size of bank bailouts 96–7 Tucker, Paul 15, 33 Turner, Adair 124–5, 126, 144 n.1 Turner Review, The (2009), UK 124, 132–3, 137 uncertainty of financial circulations 29–31, 178–9 ‘value-at-risk’ (VaR) models 91, 108–10, 111, 112, 113, 118, 121, 180 Vickers, Sir John 130 Vickers Report (ICB), UK 126, 127, 134, 138–42, 143, 174 Volcker, Paul A 72, 127, 128, 136–7, 139, 141 Volcker Report, US 138–42, 143, 174 ‘Volcker Rule’, US 126, 127, 128, 129, 130, 134, 135; see also Dodd-Frank Wall Street Reform and Consumer Protection Act Wachovia 84 Wall Street Crash (1929) 18, 31, 136 Washington Mutual 84 Weber, Max 87 Wells Fargo 84 ‘whale trades’ on derivatives markets 129 Wolf, Martin 84–5 Wolin, Neal S 139 ... understandings of the governance of the contemporary global financial crisis While debates rage over the causes and consequences of the crisis that began in the summer of 2007, the means and ends of the. .. with the prevailing perception a focus upon the management of the crisis in the US and the UK: not only was the crisis ‘made in America’, but the global dominance of the US dollar and the global. .. autumn of 2008 that the edifice of global finance genuinely appeared to be on the brink of collapse From the point of view of my project, the spiralling crisis produced a sprawling array of crisis governance