Endnotes

¹Tobias and Shin (2008) estimate that the "shadow banking" system was as large as US$10.5 trillion, comprising US$4 trillion assets of the large investment banks, $2.5 trillion in overnight repos, US$2.2 trillion in structured investment vehicles, and another US$1.8 trillion in hedge fund assets. This should be compared with US$10 trillion in assets held in the conventional US banking system, which meant that system leverage was at least double what was reported.

²IMF (2009b).

³Wessel (2009) provided a well-documented and insightful account of the thinking of US policymakers during the crisis. The inescapable conclusion is that for a long time after the start of the crisis, central bankers—Bernanke, King, Trichet, and their colleagues—did not see the crisis coming and for too long ignored the advice of those who did.

⁴The IMF (2009a) admitted that “official warnings both within and outside the Fund were insufficiently specific, detailed, or dire to gain traction with policymakers.” IMF surveillance often echoed the conventional view that advanced countries—such as the US and the UK—with relatively low stable inflation together with profitable and well-capitalized banking sectors could withstand the unwinding of the bubble in housing and capital markets.

⁵These include: the Volker recommendations in the Group of Thirty Report (2009); the Geneva Report on the World Economy (Brunnermeier et al. 2009); the de Larosière report (2009) on financial supervision and stability in the European Union; and papers by a group from New York University's Stern School (e.g., Acharya and Richardson 2009).

⁶In emerging markets a corporate sector that is highly leveraged and unprofitable or that is prone to currency mismatches (as in Indonesia and the Republic of Korea in 1997) can lead to massive problems. See Kawai (2000).

⁷Singapore has not had significant financial crises. Japan had a land price bubble in the late 1980s and a systemic banking crisis in the late 1990s, despite the fact that the finance ministry had the power to supervise and regulate banks and the central bank was not independent (see Kawai 2005). So the most important element of success or failure may not be in the organizational structure of such a systemic stability regulator, but in how it functions.

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