Includes bibliographical references and index.

Introduction -- What is a dealer bank? -- Failure mechanisms -- Recapitalizing a weak bank -- Improving regulations and market infrastructure -- Appendix: Central clearing of derivatives.

In sharp, clinical detail, Darrell Duffle walks readers step-by-step through the mechanics of large-bank failures. He identifies where the cracks first appear when a dealer bank is weakened by severe trading losses, and demonstrates how the bank's relationships with its customers and business partners abruptly change when its solvency is threatened. As others seek to reduce their exposure to the dealer bank, the bank is forced to signal its strength by using up its slim stock of remaining liquid capital. Duffle shows how the key mechanisms in a dealer bank's collapse -- such as Lehman Brothers' failure in 2008 -- derive from special institutional frameworks and regulations that influence the flight of short-term secured creditors, hedge-fund clients, derivatives counterparties, and most devastatingly, the loss of clearing and settlement services. -- Book Jacket.

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