In Switzerland by contrast, the collateral accepted in 99.8% of the transactions in the secured interbank market corresponds to the definition of the SNB collateral basket, that is, to the collateral accepted by the SNB in its own repo operations. The SNB’s collateral policy is based on a transparent, essentially rule-based approach. This means that when securities are excluded from the list of acceptable securities  2  See Diamond and Dybvig (1983). “Bank runs, deposit insurance, and liquidity”, Journal of Political Economy 1983, vol. 91, no. 3, pp. 401–19. 3  Typically, the total amount of the deposit will be some amount less than the value of the underlying asset, with the difference called a “haircut”. For more details, see Gorton and Metrick (2009) “Securitized Banking and the Run on Repo”, NBER Working Paper Series (NBER Working Paper No. 15223), August 2009. 4  This could be a reasonable approximation. See Gorton (2009): “Slapped in the Face by the Invisible Hand: Banking and the Panic of 2007”, Prepared for the Federal Reserve Bank of Atlanta’s 2009 Financial Markets Conference, May 2009; and Gorton and Metrick (2009). 5  Chart 4 illustrates the average repo haircut on structured debt. This is a good indication for an overall “haircut index”, as shown by Gorton and Metrick (2009). 6  Another important difference is that the Swiss repo market is conducted on a highly efficient automated and centralised platform while US repo transactions are traded over the counter. 7  Hördahl and King (2008).
The costs of taking these courses in college are high, especially because they do not count for college credit. Low readiness contributes to persistently low college completion rates, with only 55 percent of first-time undergraduates completing a degree within six years.13 College dropout rates are especially high among lowerincome, part-time, and nontraditional students, with high costs, low perceived ability to pay, and a lack of information about the returns to degree completion also contributing to the high dropout rate. The importance of college readiness underscores the value of high-quality K-12 schooling. But, research indicates that fewer than half of five-year-olds from low-income families possess the math and reading skills, behaviors, and overall health required for learning success, compared to 75 percent of children from middle- and high-income families.14 These differences are important because they have long-lasting effects on academic achievement and future careers. A substantial body of evidence, including research by economists at the Minneapolis Fed, points to very large economic returns to high-quality preschool and early-childhood development programs.15 Clearly, such programs can play an important role in improving economic mobility. I benefited from nursery school and kindergarten and a mother who taught me to read before I entered elementary school. And, when my junior high school tried to move me out of an accelerated math program, my mom intervened and got me back in. Paying for college is another major impediment to college attendance and completion.