is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third party interference.
These apps run on a custom built blockchain, an enormously powerful shared global infrastructure that can move value around and represent the ownership of property. This enables developers to create markets, store registries of debts or promises, move funds in accordance with instructions given long in the past (like a will or a futures contract) and many other things that have not been invented yet, all without a middle man or counterparty risk.
In the eleventh chapter of “Across the Great Divide: New Perspectives on the Financial Crisis,” Darrell Duffie argues that central clearing parties administering tri-party repurchase agreements cannot be resolved under current bankruptcy law, including recent provisions under the Dodd-Frank act. He argues that
a financial institution should not operate key financial market infrastructure backed by the same capital that supports much more discretionary forms of risk-taking, such as speculative trading or general lending.
A Hoover Press book edited by Martin Baily and John Taylor collects articles about the financial crisis. The contributions in “Across the Great Divide: New Perspectives on the Financial Crisis” include (with links to PDF files):
- Introduction, Martin Neil Baily and John B. Taylor
- Chapter 1: How Efforts to Avoid Past Mistakes Created New Ones: Some Lessons from the Causes and Consequences of the Recent Financial Crisis, Sheila C. Bair and Ricardo R. Delfin
- Chapter 2: Low Equilibrium, Real Rates, Financial Crisis, and Secular Stagnation, Lawrence H. Summers
- Chapter 3: Causes of the Financial Crisis and the Slow Recovery: A Ten-Year Perspective, John B. Taylor
- Chapter 4: Rethinking Macro: Reassessing Micro-foundations, Kevin M. Warsh
- Chapter 5: The Federal Reserve Policy, Before, During, and After the Fall, Alan S. Blinder
- Chapter 6: The Federal Reserve’s Role: Actions Before, During, and After the 2008 Panic in the Historical Context of the Great Contraction, Michael D. Bordo
- Chapter 7: Mistakes Made and Lesson (Being) Learned: Implications for the Fed’s Mandate, Peter R. Fisher
- Chapter 8: A Slow Recovery with Low Inflation, Allan H. Meltzer
- Chapter 9: How Is the System Safer? What More Is Needed?, Martin Neil Baily and Douglas J. Elliot
- Chapter 10: Toward a Run-free Financial System, John H. Cochrane
- Chapter 11: Financial Market Infrastructure: Too Important to Fail, Darrell Duffie
- Chapter 12: “Too Big to Fail” from an Economic Perspective, Steve Strongin
- Chapter 13: Framing the TBTF Problem: The Path to a Solution, Randall D. Guynn
- Chapter 14: Designing a Better Bankruptcy Resolution, Kenneth E. Scott
- Chapter 15: Single Point of Entry and the Bankruptcy Alternative, David A. Skeel Jr.
- Chapter 16: We Need Chapter 14—And We Need Title II, Michael S. Helfer
- Remarks on Key Issues Facing Financial Institutions, Paul Saltzman
- Concluding Remarks, George P. Shultz
- Summary of the Commentary, Simon Hilpert