A new NBER working paper by Gary Gorton and Andrew Metrick is entitled “Haircuts.” It’s a great title and an interesting paper. Here is the abstract:
When “confidence” is lost, “liquidity dries up.” We investigate the meaning of “confidence” and “liquidity” in the context of the current financial crisis. The financial crisis is a manifestation of an age-old problem with private money creation, banking panics. We explain this and provide some evidence with respect to the current crisis.
Here is the link (sorry, it is gated).