CAFIN and UC Investments Speaker Series Financial Risks, Innovation and Inclusion in a Post-COVID World
Darrell Duffie, Adams Distinguished Professor of Management and Professor of Finance, Stanford Graduate School of Business
Still the World’s Safe Haven? -- Redesigning the U.S. Treasury Market After the COVID- 19 Crisis
The secondary market for U.S. Treasuries became dysfunctional in March 2020, when the Covid-19 crisis triggered investor flows that overwhelmed intermediaries. Although the Fed was able to largely restore market liquidity through its unprecedented rate of Treasury purchases and other actions, the design of the Treasury market was revealed to be overdue for an upgrade. I propose a study of the costs and benefits of mandating the central clearing of Treasury transactions of all firms that are active in the market. Without a broad central clearing mandate, the size of the Treasury market will outstrip the capacity of dealers to safely intermediate the market on their own balance sheets, raising doubts over the safe-haven status of U.S. Treasuries and concerns over the cost to taxpayers of financing growing federal deficits.
The economic crisis associated with COVID-19 pandemic has altered all aspects of our lives. In a new CAFIN speaker series, we will focus on financial challenges and developments. Among the questions that are relevant are: What are the risks to the global financial system in the medium to long run? Is the banking system robust enough? What kinds of future policy interventions might be necessary? What changes to payment systems and other financial innovations have been accelerated by the crisis? How do contagion control policies affect populations that are traditionally underserved by the financial sector? Will financial inclusion be more difficult to achieve after the pandemic?
Friday, November 13 at 9:00am