Darrell Duffie
- Published in print:
- 2012
- Published Online:
- October 2017
- ISBN:
- 9780691138961
- eISBN:
- 9781400840519
- Item type:
- book
- Publisher:
- Princeton University Press
- DOI:
- 10.23943/princeton/9780691138961.001.0001
- Subject:
- Economics and Finance, Financial Economics
Over-the-counter (OTC) markets for derivatives, collateralized debt obligations, and repurchase agreements played a significant role in the global financial crisis. Rather than being traded through a ...
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Over-the-counter (OTC) markets for derivatives, collateralized debt obligations, and repurchase agreements played a significant role in the global financial crisis. Rather than being traded through a centralized institution such as a stock exchange, OTC trades are negotiated privately between market participants who may be unaware of prices that are currently available elsewhere in the market. In these relatively opaque markets, investors can be in the dark about the most attractive available terms and who might be offering them. This opaqueness exacerbated the financial crisis, as regulators and market participants were unable to quickly assess the risks and pricing of these instruments. This book offers a concise introduction to OTC markets by explaining key conceptual issues and modeling techniques, and by providing readers with a foundation for more advanced subjects in this field. The book covers the basic methods for modeling search and random matching in economies with many agents. It gives an overview of asset pricing in OTC markets with symmetric and asymmetric information, showing how information percolates through these markets as investors encounter each other over time. The book also features appendixes containing methodologies supporting the more theory-oriented of the chapters, making this the most self-contained introduction to OTC markets available.Less
Over-the-counter (OTC) markets for derivatives, collateralized debt obligations, and repurchase agreements played a significant role in the global financial crisis. Rather than being traded through a centralized institution such as a stock exchange, OTC trades are negotiated privately between market participants who may be unaware of prices that are currently available elsewhere in the market. In these relatively opaque markets, investors can be in the dark about the most attractive available terms and who might be offering them. This opaqueness exacerbated the financial crisis, as regulators and market participants were unable to quickly assess the risks and pricing of these instruments. This book offers a concise introduction to OTC markets by explaining key conceptual issues and modeling techniques, and by providing readers with a foundation for more advanced subjects in this field. The book covers the basic methods for modeling search and random matching in economies with many agents. It gives an overview of asset pricing in OTC markets with symmetric and asymmetric information, showing how information percolates through these markets as investors encounter each other over time. The book also features appendixes containing methodologies supporting the more theory-oriented of the chapters, making this the most self-contained introduction to OTC markets available.
H. Kent Baker, J. Clay Singleton, and E. Theodore Veit
- Published in print:
- 2010
- Published Online:
- May 2011
- ISBN:
- 9780195340372
- eISBN:
- 9780199894215
- Item type:
- book
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780195340372.001.0001
- Subject:
- Economics and Finance, Financial Economics
This book is dedicated solely to examining survey research in corporate finance. It is part of the Financial Management Association Survey and Synthesis Series. The purpose of this research-oriented ...
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This book is dedicated solely to examining survey research in corporate finance. It is part of the Financial Management Association Survey and Synthesis Series. The purpose of this research-oriented book is: (1) to provide financial researchers with an overview of survey methodology; (2) to synthesize the major streams or clusters of survey research in corporate finance; and (3) to provide a valuable resource and guide for those interested in conducting and understanding survey research in finance. Chapter 1 discusses the role of survey research in corporate finanec. Chapters 2 though 8 present financial theory about select corporate finance topics and provide survey evidence about how managers make decisions. Key topic areas include making capital budgeting decisions, determining a firm's cost of capital, managing a firm's capital structure, making dividend policy decisions, engaging in share repurchases, special dividends, stock splits, stock dividends, and managing risk. The book identifies whether gaps exist between finance theory and practice and how the size of the gap has changed over time. Chapter 9 discusses the state of the art of survey research in corporate finance. The book contains extensive references and numerous tables documenting survey-based studies in finance.Less
This book is dedicated solely to examining survey research in corporate finance. It is part of the Financial Management Association Survey and Synthesis Series. The purpose of this research-oriented book is: (1) to provide financial researchers with an overview of survey methodology; (2) to synthesize the major streams or clusters of survey research in corporate finance; and (3) to provide a valuable resource and guide for those interested in conducting and understanding survey research in finance. Chapter 1 discusses the role of survey research in corporate finanec. Chapters 2 though 8 present financial theory about select corporate finance topics and provide survey evidence about how managers make decisions. Key topic areas include making capital budgeting decisions, determining a firm's cost of capital, managing a firm's capital structure, making dividend policy decisions, engaging in share repurchases, special dividends, stock splits, stock dividends, and managing risk. The book identifies whether gaps exist between finance theory and practice and how the size of the gap has changed over time. Chapter 9 discusses the state of the art of survey research in corporate finance. The book contains extensive references and numerous tables documenting survey-based studies in finance.
H. Kent Baker, J. Clay Singleton, and E. Theodore Veit
- Published in print:
- 2010
- Published Online:
- May 2011
- ISBN:
- 9780195340372
- eISBN:
- 9780199894215
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780195340372.003.0007
- Subject:
- Economics and Finance, Financial Economics
In addition to distributing capital to shareholders by means of cash dividends, some firms use share repurchases and special dividends. While the practice of repurchasing shares has increased ...
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In addition to distributing capital to shareholders by means of cash dividends, some firms use share repurchases and special dividends. While the practice of repurchasing shares has increased dramatically in the country-regionplaceUnited States in the past several decades, the practice of paying special dividends has declined during that same period. This chapter provides a synthesis of the theories and empirical findings of share repurchases and special dividends and focuses on survey-based evidence. Some firms also split their stock and pay stock dividends. These decisions involve the costly process of altering the number of shares in a publicly-traded company. The chapter examines the perceptions of managers involving these other methods of distribution and whether such actions affect firm value. The chapter attempts to identify the gap between theory and practice involving these methods.Less
In addition to distributing capital to shareholders by means of cash dividends, some firms use share repurchases and special dividends. While the practice of repurchasing shares has increased dramatically in the country-regionplaceUnited States in the past several decades, the practice of paying special dividends has declined during that same period. This chapter provides a synthesis of the theories and empirical findings of share repurchases and special dividends and focuses on survey-based evidence. Some firms also split their stock and pay stock dividends. These decisions involve the costly process of altering the number of shares in a publicly-traded company. The chapter examines the perceptions of managers involving these other methods of distribution and whether such actions affect firm value. The chapter attempts to identify the gap between theory and practice involving these methods.
Arthur E. Wilmarth Jr. Jr.
- Published in print:
- 2020
- Published Online:
- September 2020
- ISBN:
- 9780190260705
- eISBN:
- 9780190260736
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/oso/9780190260705.003.0008
- Subject:
- Economics and Finance, Financial Economics
The Glass-Steagall Act created a decentralized financial system composed of three separate and independent financial sectors—commercial banking, securities markets, and insurance. The Bank Holding ...
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The Glass-Steagall Act created a decentralized financial system composed of three separate and independent financial sectors—commercial banking, securities markets, and insurance. The Bank Holding Company Act of 1956 reinforced Glass-Steagall’s policy of structural separation by prohibiting bank holding companies from engaging in any activities that were not “closely related to banking.” Glass-Steagall’s structural barriers prevented the occurrence of systemic financial crises for more than four decades. During that period, federal regulators could deal with problems arising in one financial sector without need to rescue the entire financial system. Despite Glass-Steagall’s success, federal agencies and courts undermined its prudential buffers during the 1980s and 1990s by opening loopholes. Those loopholes allowed banks to convert their loans into asset-backed securities and to offer derivatives that functioned as synthetic substitutes for securities and insurance products. Regulators and courts also allowed money market mutual funds and other nonbanks to issue short-term financial claims that served as deposit substitutes, despite Glass-Steagall’s prohibition against deposit-taking by nonbanks.Less
The Glass-Steagall Act created a decentralized financial system composed of three separate and independent financial sectors—commercial banking, securities markets, and insurance. The Bank Holding Company Act of 1956 reinforced Glass-Steagall’s policy of structural separation by prohibiting bank holding companies from engaging in any activities that were not “closely related to banking.” Glass-Steagall’s structural barriers prevented the occurrence of systemic financial crises for more than four decades. During that period, federal regulators could deal with problems arising in one financial sector without need to rescue the entire financial system. Despite Glass-Steagall’s success, federal agencies and courts undermined its prudential buffers during the 1980s and 1990s by opening loopholes. Those loopholes allowed banks to convert their loans into asset-backed securities and to offer derivatives that functioned as synthetic substitutes for securities and insurance products. Regulators and courts also allowed money market mutual funds and other nonbanks to issue short-term financial claims that served as deposit substitutes, despite Glass-Steagall’s prohibition against deposit-taking by nonbanks.
Hal S. Scott
- Published in print:
- 2016
- Published Online:
- January 2017
- ISBN:
- 9780262034371
- eISBN:
- 9780262332156
- Item type:
- chapter
- Publisher:
- The MIT Press
- DOI:
- 10.7551/mitpress/9780262034371.003.0021
- Subject:
- Economics and Finance, Economic History
It has been suggested that the government should increase the effective supply of public short-term debt in order to meet the demand by institutional cash managers for safe short-term debt. If the ...
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It has been suggested that the government should increase the effective supply of public short-term debt in order to meet the demand by institutional cash managers for safe short-term debt. If the government eliminated private issuance of short-term debt by issuing enough public short-term debt to satisfy this demand, then there could be no runs and no contagion. The same result could be achieved if the remaining short-term debt of the financial system was so small that runs would not be significant. These policies can be characterized as “crowding out” private short-term debt. This chapter discusses crowding out by the Treasury and the Federal Reserve. The Treasury could crowd out runnable private short-term debt by replacing a certain amount of long-term Treasury debt issuance with shorter term Treasury debt. Investors that would otherwise buy and hold private short-term debt would instead buy Treasuries. The Federal Reserve could “crowd out” private short-term debt, using its new tools of monetary policy—interest on excess reserves (IOER) and reverse repurchase agreements (RRPs).Less
It has been suggested that the government should increase the effective supply of public short-term debt in order to meet the demand by institutional cash managers for safe short-term debt. If the government eliminated private issuance of short-term debt by issuing enough public short-term debt to satisfy this demand, then there could be no runs and no contagion. The same result could be achieved if the remaining short-term debt of the financial system was so small that runs would not be significant. These policies can be characterized as “crowding out” private short-term debt. This chapter discusses crowding out by the Treasury and the Federal Reserve. The Treasury could crowd out runnable private short-term debt by replacing a certain amount of long-term Treasury debt issuance with shorter term Treasury debt. Investors that would otherwise buy and hold private short-term debt would instead buy Treasuries. The Federal Reserve could “crowd out” private short-term debt, using its new tools of monetary policy—interest on excess reserves (IOER) and reverse repurchase agreements (RRPs).
William K. Tabb
- Published in print:
- 2012
- Published Online:
- November 2015
- ISBN:
- 9780231158428
- eISBN:
- 9780231528030
- Item type:
- chapter
- Publisher:
- Columbia University Press
- DOI:
- 10.7312/columbia/9780231158428.003.0004
- Subject:
- Political Science, Political Theory
This chapter examines how the deregulation of financial markets allowed the dramatic growth of a shadow financial system of special investment vehicles, highly leveraged hedge funds, and private ...
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This chapter examines how the deregulation of financial markets allowed the dramatic growth of a shadow financial system of special investment vehicles, highly leveraged hedge funds, and private equity. The nonbank financial firms and the products they buy and sell are widely seen as a second banking system that grew up apart from, but not unconnected to, the older financial system. The shadow banking system includes hedge funds, private equity groups, insurance companies, money market funds, and pension funds, among others, and features funding sources involving the use and reuse of collateral posted with banks and others to finance transactions that show up as non-balance-sheet funding. This chapter argues that any analytic separation of a regulated banking system from a shadow system should be entertained with caution, suggesting that the commercial and investment banks, owing to their heavy use of the overnight repurchase market, were in the most serious trouble when their lenders refused to roll over short-term loans.Less
This chapter examines how the deregulation of financial markets allowed the dramatic growth of a shadow financial system of special investment vehicles, highly leveraged hedge funds, and private equity. The nonbank financial firms and the products they buy and sell are widely seen as a second banking system that grew up apart from, but not unconnected to, the older financial system. The shadow banking system includes hedge funds, private equity groups, insurance companies, money market funds, and pension funds, among others, and features funding sources involving the use and reuse of collateral posted with banks and others to finance transactions that show up as non-balance-sheet funding. This chapter argues that any analytic separation of a regulated banking system from a shadow system should be entertained with caution, suggesting that the commercial and investment banks, owing to their heavy use of the overnight repurchase market, were in the most serious trouble when their lenders refused to roll over short-term loans.
Benjamin Aguilar, Ajit Jain, and Kevin Neaves
- Published in print:
- 2019
- Published Online:
- June 2020
- ISBN:
- 9780190877439
- eISBN:
- 9780190877460
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/oso/9780190877439.003.0010
- Subject:
- Economics and Finance, Financial Economics
This chapter discusses the different types of short-term funding and financing alternatives that are available in the commercial money and capital markets. First, it covers commercial paper market ...
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This chapter discusses the different types of short-term funding and financing alternatives that are available in the commercial money and capital markets. First, it covers commercial paper market activity, issue maturity, and quality. Second, the chapter addresses common uses and terms for commercial and standby letters of credit as well as common issuing requirements and covenants, and discusses the parties, processes, and risks involved. Third, it covers bilateral and trilateral repurchase agreements. Fourth, the chapter discusses asset-based loans, including accounts receivable factoring and purchase order financing. Finally, it covers revolving credit facilities and their associated costs. In sum, short-term funding is important for borrowers seeking additional liquidity to finance working capital or other short-term investments. For each type of short-term funding alternative, the chapter discusses the expected return and potential risks that the borrower and lender should evaluate before entering the financial transaction.Less
This chapter discusses the different types of short-term funding and financing alternatives that are available in the commercial money and capital markets. First, it covers commercial paper market activity, issue maturity, and quality. Second, the chapter addresses common uses and terms for commercial and standby letters of credit as well as common issuing requirements and covenants, and discusses the parties, processes, and risks involved. Third, it covers bilateral and trilateral repurchase agreements. Fourth, the chapter discusses asset-based loans, including accounts receivable factoring and purchase order financing. Finally, it covers revolving credit facilities and their associated costs. In sum, short-term funding is important for borrowers seeking additional liquidity to finance working capital or other short-term investments. For each type of short-term funding alternative, the chapter discusses the expected return and potential risks that the borrower and lender should evaluate before entering the financial transaction.
Harold L. Cole
- Published in print:
- 2019
- Published Online:
- May 2019
- ISBN:
- 9780190941697
- eISBN:
- 9780190949068
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/oso/9780190941697.003.0002
- Subject:
- Economics and Finance, Macro- and Monetary Economics, Financial Economics
This chapter describes how several important financial markets operate.
This chapter describes how several important financial markets operate.
Rafe Blaufarb
- Published in print:
- 2016
- Published Online:
- June 2016
- ISBN:
- 9780199778799
- eISBN:
- 9780190607159
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199778799.003.0003
- Subject:
- History, European Modern History
Chapter 2 examines the Constituent Assembly’s abolition of feudalism in the light of the previous centuries’ debate over the proper constitutional relationship between property and power. It ...
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Chapter 2 examines the Constituent Assembly’s abolition of feudalism in the light of the previous centuries’ debate over the proper constitutional relationship between property and power. It reinterprets this famous act as a measure aimed not more than a move to end the dominance of the traditional nobility by eliminating the material foundation of its power. It shows instead that the revolutionary abolition of feudalism was an attempt to replace the prevailing model of hierarchical landholding from superiors—whether noble or not with a new system of legally-equal property based on full, independent ownership. The revolutionaries attempted to realize this transformation through a repurchase system in which tenants could buy out the various rights and prerogatives exercised by proprietary superiors over their lands. This chapter concludes that the repurchase system was more successful than generally thought, especially in urban areas.Less
Chapter 2 examines the Constituent Assembly’s abolition of feudalism in the light of the previous centuries’ debate over the proper constitutional relationship between property and power. It reinterprets this famous act as a measure aimed not more than a move to end the dominance of the traditional nobility by eliminating the material foundation of its power. It shows instead that the revolutionary abolition of feudalism was an attempt to replace the prevailing model of hierarchical landholding from superiors—whether noble or not with a new system of legally-equal property based on full, independent ownership. The revolutionaries attempted to realize this transformation through a repurchase system in which tenants could buy out the various rights and prerogatives exercised by proprietary superiors over their lands. This chapter concludes that the repurchase system was more successful than generally thought, especially in urban areas.
Alan N. Rechtschaffen
- Published in print:
- 2014
- Published Online:
- May 2014
- ISBN:
- 9780199971541
- eISBN:
- 9780199361458
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199971541.003.0007
- Subject:
- Law, Company and Commercial Law
Related to Treasury securities are debt securities, which are offered by a wide range of issuers throughout the capital markets. The issuer is obligated by fixed-income securities to make fixed ...
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Related to Treasury securities are debt securities, which are offered by a wide range of issuers throughout the capital markets. The issuer is obligated by fixed-income securities to make fixed interest payments and repay the principal amount to the buyer upon maturity of the security. These instruments, also known as bonds, may carry less risk than equities but also offer a lower potential for returns. This chapter provides an overview of debt securities or bonds. It discusses the features and types of bonds, trust indentures, bond ratings and credit rating agencies, and regulation of bond-rating agencies. It also considers special types of fixed-income securities such as repurchase agreements or repos and mortgage-backed securities. Finally, it looks at securities that are exempted from registration and disclosure requirements under the Securities Act of 1933 and the Securities and Exchange Act of 1934.Less
Related to Treasury securities are debt securities, which are offered by a wide range of issuers throughout the capital markets. The issuer is obligated by fixed-income securities to make fixed interest payments and repay the principal amount to the buyer upon maturity of the security. These instruments, also known as bonds, may carry less risk than equities but also offer a lower potential for returns. This chapter provides an overview of debt securities or bonds. It discusses the features and types of bonds, trust indentures, bond ratings and credit rating agencies, and regulation of bond-rating agencies. It also considers special types of fixed-income securities such as repurchase agreements or repos and mortgage-backed securities. Finally, it looks at securities that are exempted from registration and disclosure requirements under the Securities Act of 1933 and the Securities and Exchange Act of 1934.
Paul Davies
- Published in print:
- 2020
- Published Online:
- April 2020
- ISBN:
- 9780198854913
- eISBN:
- 9780191888977
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/oso/9780198854913.003.0007
- Subject:
- Law, Company and Commercial Law
Because of limited liability, creditor protection has always been a feature of company law. Large creditors can contract ex ante for customised protection and the law facilitates this in various ...
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Because of limited liability, creditor protection has always been a feature of company law. Large creditors can contract ex ante for customised protection and the law facilitates this in various ways, notably by the creation of the floating charge. Non-adjusting creditors require the protection of mandatory rules, at least in some situations. Creditor protection in relation to companies in the vicinity of insolvency is now well established, not only through ‘wrongful trading’ but also via transaction invalidity rules and directors’ disqualification. For going-concern companies the emphasis is on rules restricting the shifting assets to shareholders via distributions and associated rules relating to the maintenance of capital.Less
Because of limited liability, creditor protection has always been a feature of company law. Large creditors can contract ex ante for customised protection and the law facilitates this in various ways, notably by the creation of the floating charge. Non-adjusting creditors require the protection of mandatory rules, at least in some situations. Creditor protection in relation to companies in the vicinity of insolvency is now well established, not only through ‘wrongful trading’ but also via transaction invalidity rules and directors’ disqualification. For going-concern companies the emphasis is on rules restricting the shifting assets to shareholders via distributions and associated rules relating to the maintenance of capital.
Katharine Christopherson and Wolfgang Bergthaler
- Published in print:
- 2020
- Published Online:
- March 2021
- ISBN:
- 9780198793748
- eISBN:
- 9780191927867
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/oso/9780198793748.003.0038
- Subject:
- Law, EU Law
Since its establishment in 1945, the International Monetary Fund (IMF) has played a key role in ‘giv[ing] confidence to members by making the general resources of the Fund temporarily available to ...
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Since its establishment in 1945, the International Monetary Fund (IMF) has played a key role in ‘giv[ing] confidence to members by making the general resources of the Fund temporarily available to them under adequate safeguards, thus providing them with opportunity to correct maladjustments in their balance of payments without resorting to measures destructive of national or international prosperity’ through its crisis prevention and resolution role. In exercising its mandate, the IMF has had to adapt over time to significant developments in the global monetary and financial systems. Since the Second Amendment of the IMF’s Articles in 1978, subject to certain obligations under the IMF’s Articles, members may freely decide on their exchange rate arrangements merely notifying the IMF of any changes to their own exchange arrangements, which is a departure from the par value system prevalent when the IMF was established.
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Since its establishment in 1945, the International Monetary Fund (IMF) has played a key role in ‘giv[ing] confidence to members by making the general resources of the Fund temporarily available to them under adequate safeguards, thus providing them with opportunity to correct maladjustments in their balance of payments without resorting to measures destructive of national or international prosperity’ through its crisis prevention and resolution role. In exercising its mandate, the IMF has had to adapt over time to significant developments in the global monetary and financial systems. Since the Second Amendment of the IMF’s Articles in 1978, subject to certain obligations under the IMF’s Articles, members may freely decide on their exchange rate arrangements merely notifying the IMF of any changes to their own exchange arrangements, which is a departure from the par value system prevalent when the IMF was established.
Vestert Borger
- Published in print:
- 2020
- Published Online:
- March 2021
- ISBN:
- 9780198793748
- eISBN:
- 9780191927867
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/oso/9780198793748.003.0039
- Subject:
- Law, EU Law
With the euro crisis behind us, it is hard to picture the currency union without a rescue mechanism. Almost eight years have passed since the European Stability Mechanism (ESM) was created in ...
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With the euro crisis behind us, it is hard to picture the currency union without a rescue mechanism. Almost eight years have passed since the European Stability Mechanism (ESM) was created in September 2012. All states that once benefitted from its financial support have successfully exited their programs. A new round of institutional reform is now in the offing, with the ESM possibly getting ‘beefed up’ to a European Monetary Fund. But the currency union’s set-up has not always had assistance instruments like these at its disposal. At the start of 2010, when the crisis threatened the survival of the euro and the Union as a whole, its toolbox was empty. Or almost empty.
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With the euro crisis behind us, it is hard to picture the currency union without a rescue mechanism. Almost eight years have passed since the European Stability Mechanism (ESM) was created in September 2012. All states that once benefitted from its financial support have successfully exited their programs. A new round of institutional reform is now in the offing, with the ESM possibly getting ‘beefed up’ to a European Monetary Fund. But the currency union’s set-up has not always had assistance instruments like these at its disposal. At the start of 2010, when the crisis threatened the survival of the euro and the Union as a whole, its toolbox was empty. Or almost empty.