HereS a breakdown of the provided text, focusing on the content of each footnote:
Footnote 9: Discusses how federal regulators, state legislatures, and state banking authorities broadened the range of activities that banks were permitted to engage in during a specific period.
Footnote 10: Provides an example of the challenges faced by Savings and Loans (S&Ls). They issued long-term, fixed-rate residential mortgages but funded them with short-term liabilities. When interest rates rose, the value of their existing fixed-rate mortgages decreased, while they had to pay higher rates on their liabilities, threatening their survival.
footnote 11: Mentions that many states simultaneously eased their own restrictions on activities for state-chartered banks, allowing them to invest in real estate.
Footnote 12: Gives an example of the Federal Home Loan Bank Board reducing net worth requirements for federally insured S&Ls.This was done to prevent troubled S&Ls from failing and to give them a chance to recover when interest rates eventually declined.
Footnote 13: Explains that the figure mentioned refers to the cost of resolving failed S&Ls during a crisis. It cites two sources: a publication by the FDIC on the savings and loan crisis and a FRED series for gross Domestic Product from the U.S. Bureau of Economic Analysis.
Footnote 14: Clarifies that the figure mentioned covers the costs associated with bank failures that occurred between 1980 and 1994.
Footnote 15: Provides links to FRED (Federal Reserve Economic Data) for two datasets: the All-transactions house Price Index for the United States and Mortgage Debt Outstanding for all holders.
Footnote 16: Illustrates how banks used Asset-Backed Commercial Paper (ABCP) programs as conduits. This allowed them to fund assets without including them on their balance sheets, thus avoiding regulatory capital requirements. However, this created notable risks because money market mutual funds, which were the main holders of ABCP, are highly sensitive to payment delays and prone to runs. Money market funds also funded other bank assets, contributing to vulnerabilities as these instruments grew and then collapsed. Other private cash-like instruments, like auction rate securities and repurchase agreements based on ABCP, also created new vulnerabilities.
footnote 17: Cites a Washington Post* article by Binyamin Appelbaum and Ellen Nakashima from November 23, 2008, titled “Banking Regulator Played Advocate over Enforcer.”
