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The Power of InactionBank Bailouts in Comparison$
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Cornelia Woll

Print publication date: 2014

Print ISBN-13: 9780801452352

Published to Cornell Scholarship Online: August 2016

DOI: 10.7591/cornell/9780801452352.001.0001

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The United States and the United Kingdom

The United States and the United Kingdom

(p.82) 5 The United States and the United Kingdom
The Power of Inaction

Cornelia Woll

Cornell University Press

This chapter focuses on capital-market based finance in the United States and the United Kingdom. Contrary to what one would expect from liberal market economies with large capital markets, the U.S. and the U.K. governments were quite distinct in their attitudes toward the financial industry and the design of their bank support schemes. While the U.S. eventually imposed a mandatory capitalization of the major financial institutions, it did so at very favorable conditions. On the other hand, the U.K. imposed high prices and very stringent conditions on government aid and imposed sector solidarity only by encouraging healthy institutions to raise their capital by a token amount on the markets. In both countries, financial institutions also benefited from central bank intervention—particularly massive liquidity provision—but U.K. banks continuously complained that this aid could have been greater and more tailored to their needs.

Keywords:   capital-market based finance, liberal market economies, large capital markets, capitalization, sector solidarity, central bank intervention, liquidity provision, U.S. government, U.K. government

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