The Federal Reserve Bank of New York works to promote sound and well-functioning financial systems and markets through its provision of industry and payment services, advancement of infrastructure reform in key markets and training and educational support to international institutions.
Regional & Community Outreach connects the Bank to Main Street via structured dialogues and two-way conversations on small business, mortgages, and household credit.
Economic Education improves public knowledge about the Federal Reserve System, monetary policy implementation, and promoting financial stability through the Museum and programs for K-16 students and educators, and the community.
Banks and financial intermediaries perform important roles for the smooth functioning of the economy such as channeling resources from savers to productive projects and providing payment services. Because bank failure can result in significant costs for the economy, an efficient resolution mechanism is needed to mitigate such costs. This article provides a simple framework for analyzing the feasibility and cost of different resolution methods. The analysis shows that while private resolution methods, such as sale to a healthy bank, are preferred options in terms of minimizing costs, they may not be feasible when the distressed institution is large or complex or when its failure occurs during a systemic crisis. Instead, firms and regulators may face second-best solutions, entailing trade-offs between disorderly liquidation and the use of public funds.