Bank Failures Costing Economy Billions: New Resolution Framework Proposed
The article discusses how the failure of banks during the financial crisis had severe consequences for customers and the economy. Different methods were used to save failing banks, depending on the situation. The size and complexity of a bank play a role in determining the best solution. The study suggests a simple framework to help firms and regulators make decisions in such cases. The financial crisis showed that large banks needed special attention, as seen with interventions like debt guarantees and capital injections. Lehman Brothers' bankruptcy caused major disruptions due to the lack of a proper resolution system.