Found 12 article(s) for author 'Banks'

The Fed Should Raise Rates, but Not the Ones You’re Thinking

The Fed Should Raise Rates, but Not the Ones You’re Thinking. Jason Furman, August 20, 2018, Opinion, “The Federal Reserve has kept rates too low for too long. I’m not referring to interest rates. It’s high time for the Fed to raise countercyclical capital-buffer rates, which govern the amount of extra equity and cash banks are supposed to hold in good times. Increasing the capital buffer would reduce the risk of financial instability, set a precedent for sound macroeconomic management, and build up a bigger cushion for the next downturn.Link

Tags: , , , , ,

Containing Systemic Risk by Taxing Banks Properly

Containing Systemic Risk by Taxing Banks Properly. Mark Roe, November 20, 2017, Paper, “At the root of recurring bank crises are deeply-implanted incentives for banks and their executives to take systemically excessive risk. Since the 2008–2009 financial crisis, regulators have sought to strengthen the financial system by requiring more capital (which can absorb losses from risk-taking) and less risk-taking, principally via command-and-control rules. Yet bankers’ baseline incentives for system-degrading risk-taking remain intact.Link

Tags: , , , , , , ,

Don’t Bank on Bankruptcy for Banks

Don’t Bank on Bankruptcy for Banks. Mark Roe, October 18, 2017, Opinion, “As a part of their efforts to roll back the 2010 Dodd-Frank Act, congressional Republicans have approved a measure that would have courts, rather than regulators, oversee megabank bankruptcies. It is now up to the Trump administration to decide if it wants to set the stage for a repeat of the Lehman Brothers collapse in 2008.Link

Tags: , , , , , ,

Interest Rate Conundrums in the Twenty-First Century

Interest Rate Conundrums in the Twenty-First Century. Samuel Hanson, March 31, 2017, Paper, “A large literature argues that long-term interest rates appear to react far more to high-frequency (for example, daily or monthly) movements in short-term interest rates than is predicted by the standard expectations hypothesis. We find that, since 2000, such high-frequency “excess sensitivity” remains evident in U.S. data and has, if anything, grown stronger. By contrast, the positive association between low-frequency changes (such as those seen at a six- or twelve-month horizon) in short- and long-term interest rates, which was quite strong before 2000, has weakened substantially in recent years. As a result, “conundrums”— defined as six- or twelve-month periods in which short rates and long rates move in opposite directions—have become far more common since 2000.Link

Tags: , , , , ,

The Financial Regulatory Reform Agenda in 2017

The Financial Regulatory Reform Agenda in 2017. Robin Greenwood, Samuel Hanson, Jeremy Stein, Adi Sunderam, February 2017, Paper, “We take stock of the post-crisis financial regulatory reform agenda. We highlight and summarize areas of clear progress, where post-crisis reforms should either be maintained or built upon. We then identify several areas where the new regulations could be streamlined or rolled back in an effort to reduce the burden on the financial sector, particularly on smaller banks.Link

Tags: , , , , , , , , , ,

Publish the Secret Rules for Banks’ Living Wills

Publish the Secret Rules for Banks’ Living Wills. Hal Scott, June 10, 2016, Opinion. “The Federal Reserve and the Federal Deposit Insurance Corp. recently determined that five of America’s largest banks do not have credible plans to go through bankruptcy without relying on extraordinary government support. If these five firms— J.P. Morgan Chase, Bank of America, Wells Fargo, Bank of New York Mellon and State Street—can’t develop “living wills” that satisfy regulators, then the Dodd-Frank Act authorizes the government to break them up as soon as 2018.Link

Tags: , , , ,

The Volcker Rule as structural law: implications for cost-benefit analysis and administrative law

The Volcker Rule as structural law: implications for cost-benefit analysis and administrative law. John Coates, 2016, Paper. “The Volcker rule, a key part of Congress’s response to the financial crisis, is best understood as a “structural law,” a traditional Anglo-American technique for governance of hybrid public-private institutions such as banks and central banks. The tradition extends much farther back in time than the Glass-Steagall Act, to which the Volcker Rule has been unfavorably (but unfairly) compared. The goals of the Volcker Rule are complex and ambitious, and not limited to reducing risk directly, but include reshaping banks’ organizational cultures. Another body of structural laws, part of the core of administrative law, attempts to restrain and discipline regulatory agencies, through process requirements such as cost-benefit analysis (CBA). Could the Volcker rule be the subject of reliable, precise, quantified CBA? Given the nature of the Volcker rule as structural law, its ambitions, and the current capacities of CBA, the answer is clearly “no,” as it would require regulators to anticipate, in advance of data, private market behavior in response to novel activity constraints.Link

Tags: , , , , ,

Vulnerable banks

Vulnerable banks. Robin Greenwood, March 2015, Paper. “We present a model in which fire sales propagate shocks across bank balance sheets. When a bank experiences a negative shock to its equity, a natural way to return to target leverage is to sell assets. If potential buyers are limited, then asset sales depress prices, in which case one bank’s sales impact other banks with common exposures. We show how this contagion effect adds up across the banking sector, and how it can be estimated empirically using balance sheet data. We compute bank exposures to system-wide deleveraging, as well as the spillovers induced by individual banks…” Link

Tags: , , , , , ,

Harpooning the London Whale is no Substitute for Reform

Harpooning the London Whale is no Substitute for Reform. Mark Roe, August 15, 2013, Opinion. “And so the drama moves on to a courtroom. Two prime traders in JPMorgan Chase’s “London whale” misadventure have been indicted. Side plots may unfold, perhaps via extradition proceedings. But here is the big question: will the indictments lead to better, stronger financial markets? Well, yes and no. Recall the problem: JPMorgan’s London trading desk made trades that would be profitable if the post-crisis American economy remained weak. As the economy improved, the traders sought to reverse the investments…” Link verified August 15, 2013

Tags: , , , , , , , ,