valuing asian and portfolio options by conditioning on the geometric mean price the valuation of asian or a average price options and of european options on portfolios in a black scholes environment has given researchers trouble the difficulty with these problems is that the probability distribution of the variable which determines the option payoff at expiration a sum of correlated lognormal random variables has no closed form representation for the asian case the approach generally taken has been to approximate the distribution of the arithmetic average price while for the portfolio option case attempts have focused on discretizing the joint distribution of the terminal prices of the assets comprising the portfolio and approximating the expected risk neutral option payoff with a discrete sum these approaches are not entirely satisfactory the distribution approximating procedures for asian options are not very accurate for some cases while the computational requirements for obtaining a reasonably accurate estimate using the discretizing or multinomial approaches for por

minimum return guarantees with fund switching rights an optimal stopping problem abstract recently there is a growing trend to offer guaranteed products where the investor is allowed to shift her account investment value between multiple funds the switching right is granted a finite number of times per year i e it is american style with multiple exercise possibilities in consequence the pricing and the risk management is based on the switching strategy which maximizes the value of the guarantee put option we analyze the optimal stopping problem in the case of one switching right within different model classes and compare the exact price with the lower price bound implied by the optimal deterministic switching time we show that within the class of log price processes with independent increments the stopping problem is solved by a deterministic stopping time if and only if the price process is in addition continuous thus in a sense the black and scholes model is the only meaningful pricing model where the lower price bound gives the exact price it turns out that even moderate deviations from the black and scholes model assumptions give a lower price bound which is really below the exact price this is illustrated by means of a stylized stochastic volatility model setup

cross hedging minimum return guarantees basis and liquidity risks we reveal pitfalls in the hedging of insurance contracts with a minimum return guarantee on the underlying investment e g an external mutual fund we analyze basis risk entailed by hedging the guarantee with a dynamic portfolio of proxy assets for the funds we also take account of liquidity risk which arises since the insurer may need to advance funds for performing the hedge based on a least squares monte carlo simulation we study the economic implications of basis and liquidity risks we demonstrate that both risks may be surprisingly high and show how the design of the contract and the hedging strategy may help to alleviate them

research activities and budget allocations among federal reserve banks this paper applies the theory of bureaucracy to the internal operation of the federal reserve system according to the bureaucratic model the board of governors will use budget allocations to the individual reserve banks as a means of controlling their provision of information by examining the research publications of reserve banks we find two banks which began providing adverse publicity for the system in recent years the empirical analysis reveals that the budgets of these banks have decreased following the changes in research agendas

hedging and liquidity this article develops a model for evaluating alternative hedging strategies for financially constrained firms a key advantage of the model is the ability to capture the intertemporal effects of hedging on the firm s financial situation we characterize the optimal hedge a wide range of alternative hedging strategies can be specified and the model allows us to determine in each case if the hedging strategy raises or lowers firm value and by how much we show that hedging firm value hedging cash flow from operations and hedging sales revenue are not optimal the article highlights the fact that every hedging strategy comes packaged with a borrowing strategy which requires careful consideration futures markets often provide the most liquid and convenient instruments for managing risk however because futures contracts are marked to market it is often impossible to simultaneously hedge cash flows and values for example a futures contract that locked in the value of gold that a corporation planned to extract in one year would generate an uncertain cash flow pattern over the year this article examines how liquidity and cash flow timing problems associated with different hedging strategies can affect a firm s value in our model the objective for hedging is to increase the firm s financial flexibility an optimal hedge maximizes the firm s liquidityslack in the form of excess cash or unused debt capacitywhen liquidity is most valuable this lowers the danger of costly financial distress reduces the effective cost of external financial constraints and makes value maximizing investments affordable a firm with no financial constraints does not gain from hedging and the higher the firm s financial constraints the greater the potential value of hedging the value of hedging depends critically on the design of the hedging strategy we show that the optimal hedge minimizes the variability in the marginal value of the firm s cash balances such a hedge efficiently redistributes cash balances across different states and periods taking cash from those states for which the marginal cost of the financial constraint is low and giving cash to those states for which the marginal

federal reserve independence abstract the federal reserve is always called an independent agency the term independent is rarely defined the only attempt in the literature and internal records is based on chairman martin s statement that the federal reserve is independent with the government not independent of the government martin explained several times that independence within government meant that the federal reserve helped to finance government budget because they were approved by congress and signed by the president financing budget deficits is the very opposite of the principle adopted when congress approved the federal reserve act in 1913 in fact the federal reserve has supported treasury operations many times i conclude that it is far more important to have an enforceable policy rule such as the taylor rule but any rule must have a provision that permits the rule to be set aside

bargain hunting or star gazing investors preferences for stock mutual funds investors who wish to purchase shares in mutual funds balance many types of information from a variety of sources when making their fund selection this research examines how investors choose a mutual fund within a given class of funds among the major findings are that investors pay a great deal of attention to past performance and vastly overweight loads relative to expense ratios when evaluating a fund s overall fee structure i also find that investors with a greater knowledge of basic finance are less likely not more likely to make reasonable fund choices

inflationary bias of the federal reserve system a bureaucratic perspective abstract the federal reserve system does not receive a budget from congress but instead finances its operation from interest payments on its government security portfolio this peculiar financing arrangement provides the foundation for a bureaucratic model of federal reserve official behavior the empirical section tests the bureaucratic model by analysing the fed s expenditure record since 1947 and its policy actions during periods of constitutional revision

money politics and the post war business cycle abstract the political economy literature has enshrined as stylized fact the view that lower inflation and temporarily lower growth follow the election of republican presidents and has emphasized political manipulation of monetary policy as an explanation support for the monetary explanation comes in econometric work that largely ignores identification issues that dominate the literature on measuring the effects of monetary policy we generalize a standard vector autoregression framework to accommodate discrete political party variables we find almost no support for the view that political effects on the macroeconomy operate through monetary policy and only weak evidence that political effects are significant at all

deficits money and inflation abstract this paper examines the interrelationships between monetary and fiscal policy specifically it seeks to determine whether government budget deficits influence monetary growth using a money supply model originally developed by barro we find that deficits have had a significant impact on the growth of the u s money supply throughout most of the period since 1961 such a relationship need not always hold it depends on whether government deficits place upward pressure on interest rates and whether the central bank monetizes the debt in an effort to stabilize interest rates

the objectives and priorities of monetary policy under different federal reserve chairmen this paper utilizes a monetary policy reaction function that relates policy intentions to forecasts of policy objectives estimates of this reaction function over the post accord period suggest that the burns period was unique while the martin and volcker periods were extremely similar the burns period was structurally distinct from both the martin and volcker periods further model specifications that allow for an independent influence on monetary policy from different presidential administrations also imply that there are significant differences in monetary policy under different fed chairmen copyright 1990 by ohio state university press

the economic impact of mariculture on a small regional economy abstract this case study of southern honduras explores whether new exports act as staples or promote enclave development aquaculture exhibits low backward and strong forward linkages however reliance on imported inputs is likely to increase as vertical integration disease and quality concerns grow in addition there are only minor fiscal linkages through municipality taxes and the region has received a minor share of the surpluses generated shrimp farmers have tended to use reinvestment to deepen rather than widen their activities any moderate consumption linkages remain dependent upon the ecological health of the export sector itself

branch plants and the evolving spatial division of labour a study of material linkage change in the northern region of england phelps n a 1993 branch plants and the evolving spatial division of labour a study of material linkage change in the northern region of england reg studies 27 87 101 recent literature has suggested that manufacturing industry including that in peripheral regions is becoming more locally embedded as a result of processes of externalization and localized linkage formation this paper explores the hypothesis that branch plants have in terms of spatial patterns of material linkages become more locally embedded as a result of recent industrial restructuring evidence from a survey of manufacturing establishments in the northern region of england is used to explore hypotheses regarding the contribution of new greenfield investments and in situ restructuring to aggregate changes in spatial patterns of linkages the results suggests that despite processes of externalization northern region branch plants continue to be poorly integrated into the regional economy consequently it is argued that the cont

government borrowing and monetary accommodation this paper re examines the relationship between treasury borrowing and monetary growth examined previously with annual data by barro niskanen and hamburger and zwick our analysis based on quarterly data produces evidence of a positive and significant impact of total treasury borrowing upon the growth of the monetary base for the 1954 i 1961 ii and 1961 iii 1974 iv periods but an insignificant coefficient for the barro expenditure variable when the coefficient instability during the 1961 iii 1980 iv period is corrected by a dummy variable technique thy debt coefficient is positive and significant and remains stable for this two decade period

hedging using simulation a least squares approach abstract this paper presents a new and flexible computational approach to derivative hedging it is based on the use of least squares regression in order to compute the hedging portfolio this nonparametric methodology can be readily applied to any derivative contract written on a single underlying risky asset in a complete market with continuous markov price paths we illustrate this technique computing sensitivities on plain vanilla and exotic options with both european and american exercise style the achieved numerical accuracy is always comparable with the best simulation and semianalytic techniques presented in the literature

the demise of the public interest model of the federal reserve system the political economy of american monetary policy cambridge university press cambridge 19901 edited by thomas mayer is a collection of one previously published and eighteen unpublished works that seeks to review consolidate and extend the growing literature on a positive theory of the federal reserve system a major theme of the collection is that the traditional public interest view of the fed has little to offer as a guide to understanding the behavior of federal reserve officials at the same time the collection offers a word of caution to practitioners of the positive theory who use a naive public choice approach according to this subplot a narrow self interest approach to the fed is not much better than the traditional alternative a general theory of the federal reserve system requires the right blend of the best elements from the staid public interest view and the renegade public choice view as a review of the current state of the literature this collection of works has much to offer the book is at its best in posing questions that force not only the public interest proponent but also the naive public choice theorist to rethink their positions the book is less useful i think as a road map to future research in contrast to this book s premise the problem i see with the naive public choice approach is not that it has been too radical but that it has not been radical enough the renegade assumption that fed decisionmakers are self interested utility maximizers is misleading only when used within the context of a misspecified model of the macroeconomy i argue in this review essay that the next discrete step in the evolution of a positive theory of central banking is to supplement the self interest assumption with

practical policy iteration generic methods for obtaining rapid and tight bounds for bermudan exotic derivatives using monte carlo simulation abstract we introduce a set of improvements which allow the calculation of very tight lower bounds for bermudan derivatives using monte carlo simulation these tight lower bounds can be computed quickly and with minimal hand crafting our focus is on accelerating policy iteration to the point where it can be used in similar computation times to the basic least squares approach but in doing so introduce a number of improvements which can be applied to both the least squares approach and the calculation of upper bounds using the andersen broadie method the enhancements to the least squares method improve both accuracy and efficiency results are provided for the displaced diffusion libor market model demonstrating that our practical policy iteration algorithm can be used to obtain tight lower bounds for cancellable cms steepener snowball and vanilla swaps in similar times to the basic least squares method

congressional influence on u s monetary policy abstract congressional influence is generally discounted or ignored in political models of federal reserve behavior here i show that changes in the leadership of the senate banking committee are significantly correlated with monetary base growth more liberal committee leaders are associated with significantly higher base growth other factors held constant the result is shown to hold across several econometric specifications and different definitions of the congressional preference variable

on the existence of a political monetary cycle this paper examines electoral influence on monetary policy as measured by ml money growth i find a significant four year electoral cycle in money growth even when controlling for the influence of interest rates income and budget deficits further the residual electoral cycle produces the income and inflation movements associated with the political business cycle when it is used in simulations of simple reduced form macro models the paper concludes by discussing the difficulties in rationalizing cyclical monetary policy with rational expectations

presidential politics budget deficits and monetary policy in the united states 1960 1976 this paper has focused on the extent to which the traditional tools of macroeconomic management in the united states monetary and fiscal policy have contributed to a political business cycle regardless of whether politicians can successfully influence real economic variables to their own ends the evidence presented here suggests that they tried and that they enjoyed some at least indirect aid from their independent monetary authorities in doing so several major conclusions emerge

the policy preferences of fomc members as revealed by dissenting votes comment the purposes of this comment are to present evidence that casts doubt on several of the conclusions of susan belden s recent paper in this journal 1989 and to suggest directions for future research in this area to begin there is skepticism that dissenting votes at least as belden measures them can be unbiased indicators of policy preferences in addition belden partially recognizes but does not fully specify three influences on federal open market gommittee fomc member voting that are prominently featured in the literature these influences are 1 fomc member training background and career experience 2 state of the economy measures and 3 partisanship measures each of these factors alone may help to explain one of belden s three major findings first the training backgrounds and career experiences of bank presidents may help to explain belden s affirmation of their penchant to dissent from fomc directives on the side of monetary tightness second the state of the economy may help to explain belden s finding of a decline in dissent voting when arthur burns was chairman of the federal reserve third differences between the party of the president and the partisan composition of the board of governors may help to explain belden s discovery of shifts in ease and tightness dissent voting behavior under different chairmen since this comment will indicate how these influences qualify belden s elndings it will at the same time suggest fruitful directions for the research agenda in this area

reliable and unreliable partisan appointees to the board of governors every new appointment to the board of governors in recent years has triggered speculation as to how the new governor will vote in fomc meetings while several studies have hinted at partisan voting behavior by governors no study has yet attempted to identify reliable and unreliable partisan voting behavior and to pinpoint the background characteristics of governors that distinguish between the two this paper indicates that board members with a background in economics consistently voted in line with the economic ideology of the appointing president noneconomists on the board however displayed no such partisan voting behavior and were seen to be influenced by pressures emanating from the administration and by the monetary environment prior to their appointment over the 1951 to 1987 period most presidents have appointed reliable governors earlier in their presidential terms when the returns from being able to influence subsequent monetary policy are great and have chosen unreliable governors later in their terms when election support from the interest groups that these unreliables represent is important the results of the present paper suggest skepticism toward the recent spate of rational expectations game theoretic models which feature a dictatorial policy maker gaming atomistic market participants whose only political activity voting generates monetary surprises followed by convergence to an equilibrium because of their obsession with the ceremonial formalism of their genre these models ignore a vast complementary literature and as a consequence display conspicuously flimsy institutional and historical premises instead the present paper argues for the greater relevance of models of uncoordinated interaction between multiple political and private principals and federal reserve agents

agent heterogeneity and consensual decision making on the federal open market committee the consensual aspects of decision making are essential for understanding policy made by administrative organizations that take the form of a commision or board consensual decision making reflects the degree of policy cohesion exhibited by high level officials within administrative organizations it is proposed here that this type of behavior may differ between heterogeneous agents the federal open market committee fomc of the federal reserve system serves as a salient setting for testing these propositions in a time series context the empirical results indicate that major intra institutional differences exist between board of governor bog and regional bank president rbp members of the federal open market committee fomc regarding consensual behavior in terms of policy decision making the econometric evidence clearly demonstrates that the consensual behavior of these agents are fundamentally different from one another this in turn has important implications for the study of other commission and board policy making bodies that consist of agents who are not all homogeneous

monetary policy signaling from the administration to the federal reserve this chapter employs the index of monetary policy signaling from the administration to the federal reserve safer that was developed in chapter two the safer index is a simple weekly sum of articles that appeared in the wall street journal in which administration officials expressed a desire for easier 1 or tighter 1 monetary policy a key assumption is that systematically over time the financial media capture the essence of communication that is going on between the executive branch and federal reserve officials 1 the signaling index is employed in ordinary least squares regressions for the period from january 1964 to november 1991 cumulative values of the safer index over a three week period as an explanatory variable are found to have a statistically significant effect on the average federal funds rate during the third week as the dependent variable further evidence suggests that the safer index is granger causal with respect to the federal funds rate after classifying the signals by sources within the administration oval office council of economic advisers treasury and other and unidentified sources it is shown that for the overall 1964 1991 period signals from the treasury department and from other and unidentified sources have a statistically significant effect on the federal funds rate while signals from the oval office and the council do not when the data are segmented according to who was the chairman of the federal reserve board at the time ordinary least squares results indicate that the federal reserve did not systematically respond to executive branch signaling in a statistically significant way when william mcchesney martin g william miller and alan greenspan were chairmen but did respond statistically significantly to administration signaling during portions of the periods during which arthur burns and paul volcker were chairmen

the impact of a large multinational organization on a small local economy barrow m and hall m 1995 the impact of a large multinational organization on a small local economy reg studies 29 635 653 this paper is based on a research project undertaken for american express a m e x in brighton which aimed to identify the economic impact of american express on the local economy a research methodology is employed which inter alia utilizes concepts drawn from development economics notably economic linkages and enclave development adapted to the requirements of the project we use both quantitative data from the firm s payroll and suppliers databases and interview data from a variety of sources to make a judgement about the impact of the firm upon the locality we find there are both quantitative and qualitative links with the rest of the economy we try to measure both absolute and relative impacts of the firm by making use of different counter factual scenarios we find a generally beneficial effect of the firm upon the locality in contrast to a number of other st

a bargaining model of partisan appointments to the central bank abstract in this paper a bargaining model is developed to analyze the appointment of central bankers in a two party political system the major results of the paper are 1 the party in power will appoint partisans early on but later appointments will be increasingly moderate in their views concerning monetary policy 2 changing the timing of the appointment of the board chairman from the end of a president s term in office to the first period of the president s term will lead to more partisan monetary policy 3 in equilibrium nominations to the board are not rejected thus confirmation hearings appear to be nothing more than a rubber stamp process 4 lengthening the terms on the board relative to the electoral cycle will lead to more moderate appointments to the central bank and a reduction in partisan policymaking

partisan monetary policies presidential influence through the power of appointment we investigate the channels through which partisan influence from a presidential administration could affect monetary policy making influence could be a result of direct presidential pressure exerted on members of the federal open market committee fomc or it could be a result of partisan considerations in presidential appointments to the board of governors to investigate these two channels of influence we devise and apply a method for estimating parameters of monetary policy reaction functions that can vary across individual members of the fomc our results suggest that the appointments process is the primary mechanism by which partisan differences in monetary policies arise

is there a dead spot new evidence on fomc decisions before elections using new data that chronicle the fed s internal forecast of the output gap from 1973 to 1998 this paper tests for an electoral cycle in the decisions of the federal open market committee fomc the paper provides evidence of a dead spot in the committee s decisions before presidential elections for given values of these internal forecasts the fomc is less likely to decide to tighten monetary policy in the year preceding a presidential election than at other times

futures cross hedging with a stationary basis when managing risk frequently only imperfect hedging instruments are at hand we show how to optimally cross hedge risk when the spread between the hedging instrument and the risk is stationary for linear risk positions we derive explicit formulas for the hedge error and for nonlinear positions we show how to obtain numerically efficient estimates finally we demonstrate that even in cases with no clear cut decision concerning the stationarity of the spread it is better to allow for mean reversion of the spread rather than to neglect it

regulatory change corporate restructuring and the spatial development of the british financial sector marshall j n gentle c j s raybould s and coombes m 1992 regulatory change corporate restructuring and the spatial development of the british financial sector reg studies 26 453 467 the paper explores the dynamics of employment growth and change in the financial sector in the regions of britain during the 1980s complementing other work which has focused on international and corporate finance it focuses on personal financial markets the paper demonstrates the way in which regulatory change has initiated corporate diversification into new markets this reorganization has also included a round of innovation in new financial services and intensified competition in established personal sector markets restructuring has both intensified the concentration of the industry in the south and east of the country and promoted decentralization from london professional and managerial staff associated with the development of new services have been concentrated in the greater south east the rationaliza

the american political economy macroeconomics and electoral politics here is the most comprehensive and authoritative work to date on relationships between the economy and politics in the years from eisenhower through reagan extending and deepening his earlier work which had major impact in both political science and economics hibbs traces the patterns in and sources of postwar growth unemployment and inflation he identifies which groups win and lose from inflations and recessions he also shows how voters perceptions and reactions to economic events affect the electoral fortunes of political parties and presidents hibbs s analyses demonstrate that political officials in a democratic society ignore the economic interests and demands of their constituents at their peril because episodes of prosperity and austerity frequently have critical influence on voters behavior at the polls the consequences of eisenhower s last recession of ford s unwillingness to stimulate the economy of carter s stalled recovery were electorally fatal whereas johnson s nixon s and reagan s successes in presiding over rising employment and real incomes helped win elections the book develops a major theory of macroeconomic policy action that explains why priority is given to growth unemployment inflation and income distribution shifts with changes in partisan control of the white house the analysis shows how such policy priorities conform to the underlying economic interests and preferences of the governing party s core political supporters throughout the study hibbs is careful to take account of domestic institutional arrangements and international economic events that constrain domestic policy effectiveness and influence domestic economic outcomes hibbs s interdisciplinary approach yields more rigorous and more persuasive characterizations of the american political economy than either purely economic apolitical analyses or purely partisan politicized accounts his book provides a useful benchmark for the advocacy of new policies for the 1990s a handy volume for politicians and their staffs as well as for students and teachers of politics and economics

factors affecting monetary policy in an era of inflation abstract a money supply reaction function is developed and estimated within the context of an is lm framework to test the responsiveness of the federal reserve to the government budget restraint and certain parameters of the model the results reveal that a large portion of the recent expansion of the monetary base may be attributed to increases in government debt and provide an essential first step in quantifying the inflationary impact of deficits the monetary base is also expanded in response to increases in inflationary expectations and previous increases in the monetary base but is not statistically correlated to changes in the unemployment rate or potential national income or to rises in interest rates caused by sources other than higher inflationary expectations previous monetary policy or the treasury borrowing requirement

presidential elections and federal reserve policy an empirical test traditional macro economic models of federal reserve fed behavior typically assume that the fed enjoys a well defined objective function based on social welfare and generally predict counter cyclical monetary policy the increasing observation of procyclical monetary policy has led many researchers to investigate new models of fed behavior several recent papers imply that procyclical fed behavior is due to a lack of political accountability friedman 7 toma 23 and shughart and tollison 21 all attribute considerable bureaucratic discretion to the fed and seek to explain monetary policy by examining typical bureaucratic objectives other papers such as pierce 19 20 weintraub 26 and kane 10 11 argue that the fed operates in an arena filled with political constraints that cause sub optimal monetary policy but these constraints are not modeled explicitly one possible political constraint on fed behavior is the incumbent president s desire for re election in the political business cycle pbc literature presidential re election opportunities are enhanced by the production of a precise set of inflation and unemployment outcomes leading up to the election thus to the extent that presidents desire cyclical macro economic outcomes there will be executive pressure on the fed to create or accommodate such outcomes the effect this pressure will have on fed policy is ultimately an empirical question but most models deal with it by assumption traditional macro modeling assumes a zero effect while the pbc models implicitly assume that a favorable election cycle is a primary goal of all economic policymakers this paper examines presidential influence on the federal reserve by testing for an election cycle in money growth the major result is the identification of a regular 16 quarter cycle in money growth corresponding with presidential elections this cyclical effect is found to be stable over time and significant under a wide range of model specifications further when the cyclical component of money growth is used to simulate a simple macro model it produces a classic political business cycle in inflation and real output growth

federal open market committee structure and decisions abstract this paper examines the dissents of federal open market committee members regarding the domestic monetary policy directive it shows that on balance governors appointed by democratic u s presidents dissented significantly on the easier side while governors appointed by republican u s presidents dissented significantly on the tighter side the pattern of dissents for the reserve bank presidents was like that of republican appointees to the board of governors the bank presidents voting did not reflect regional points of view furthermore the timing of the dissents by both the governors and presidents did not seem to be associated with the onset of congressional or presidential elections

deficits money and inflation comment abstract this paper re examines the fiscal policy money growth linkage analysed by hamburger zwick 1981 in this journal newly revised national income accounts data are employed unlike hamburger zwick we do not find any strong evidence of a positive federal budget deficit money growth relationship over the period 1961 1974 when the estimation period is extended to 1976 and then to 1978 the results suggest no relationship between deficits and money growth

firm size and regional linkages a typology of manufacturing establishments in southern spain romero i and santos f j 2007 firm size and regional linkages a typology of manufacturing establishments in southern spain regional studies 41 571 584 regions with different levels of development are characterized by different enterprise compositions according to firm size and regional productive linkages using these two variables and two additional ones the technological level and the position in the value chain the composition of the industrial sector in any region can be studied in this respect a new theoretical enterprise typology is proposed in this paper as a powerful analytical tool furthermore empirical work is carried out using a data set from the survey done to estimate the regional input output table of andalusia a backward region in southern spain thus the theoretical enterprise typology is applied to the industry in andalusia so that some strengths and weaknesses of the regional economy are identified romero i et santos f j 2007 la taille de l entreprise et les mail

how central should the central bank be the nature and scope of the federal reserve s authority and the structure of its decision making are now on the table to an extent that has not been seen since 1935 and the fed s vaunted independence is under some attack this essay asks what the federal reserve should and shouldn t do leaning heavily on the concept of economies of scope in particular i conclude that the central bank should monitor and regulate systemic risk because preservingfinancial stability is a closely aligned with the standard objectives of monetary policy and b likely to require lender of last resort powers i also conclude that the fed should supervise large financial institutions because that function is so closely to regulating systemic risk however several other functions now performed by the fed could easily be done elsewhere jel e52 e58 g21 g28