By Simon van Norden

Today, we're fortunate to have Simon van Norden, Professor of Finance at HEC Montréal (École des Hautes Études Commerciales), as a guest blogger.

"Once you've seen one financial market crisis...you've seen one financial market crisis."

-- Attributed to Federal Reserve Board Governor Kevin Warsh by former US Treasury Assistant Secretary for Economic Policy Phillip Swagel in The Financial Crisis: an Inside View, March 2009, p. 4.

The financial crisis has set a lot of records so far; it's certainly the worst US banking crisis of my lifetime. Some, as suggested by the above quote, see such crises as unique events; each one is singular and there's not much to be learned about how to handle one from looking at past crises. For example, there's no precedent that I know of for a banking crisis involves the failure of the biggest counterparties for credit default swaps.

I'm behind the curve on recommending Phillip Swagel's BPEA paper on the Administration's response to the financial crisis. But today he talked to the students in my macro course, and his presentation just reinforced my view that his account is one that everbody should read.

Here's a picture showing the evolution of the one-month Libor-OIS spread.

Other commentary on the paper: [0], [1], [2], [3].