#80 - Andrew Metrick: Master Class in Financial Crises & Bank Runs

8 snips

Jul 22, 2025

Andrew Metrick, the Janet Yellen Professor of Finance at Yale, delves deep into financial crises and bank runs. He reveals the vulnerabilities of the banking system and discusses critical lessons from recent crises, particularly the SVB collapse. Andrew emphasizes the pivotal role of central banks in crisis management and explains the nuances between liquidity and solvency issues. He also critiques the evolution of deposit insurance and highlights the systemic risks confronting today’s financial landscape. Prepare for some insightful revelations!

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INSIGHT

Moral Hazard vs. Crisis Intervention

Moral hazard from deposit insurance and government bailouts raises risk-taking but absence of safety nets risks total collapse.
Governments inevitably intervene in crises, so preparing for intervention is pragmatic.

INSIGHT

Limits of Government Backstops

Ireland’s 2008 bank bailout shows blanket guarantees can cause sovereign insolvency even for healthy economies.
Government backstops have natural limits constrained by fiscal capacity.

INSIGHT

Interest Rate Risk Allocation Choices

Shifting interest rate risk to borrowers (e.g., Europe) or letting banks absorb it (e.g., U.S.) both distribute economic risks differently.
Neither approach eliminates risk; it only reallocates it in the economy.

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Andrew is the Janet Yellen Professor of Finance and Management at the Yale School of Management and Director of the Yale Program on Financial Stability, specializing in financial crises. He discusses the vulnerabilities of the banking system, lessons from recent crises like SVB and the GFC, the government’s role in crisis management, and the biggest risks facing today’s financial system.

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(As of December 22, 2025)