- Links for 12-23-14
- Fed Watch: Looking Backward to See the Future
- Do Safer Banks Mean Less Economic Growth?
Posted: 23 Dec 2014 12:06 AM PST
Posted: 22 Dec 2014 12:45 PM PST
Posted: 22 Dec 2014 11:32 AM PST
Do safer banks mean less economic growth?: One reason the financial crisis was so severe was that banks were highly leveraged. That is, they relied heavily on borrowed funds to acquire risky financial assets. This left them highly vulnerable when those assets' prices collapsed and the banks were unable to raise the funds they needed to pay off their loans.
In response, regulators have increased the capital requirements for banks. This limits the amount of leverage they can use and provides a safety buffer against losses. But banks protest that these more stringent capital requirements interfere with their ability to provide the financing the economy needs to function optimally, and hence this will slow economic growth.
However, recent research calls this into question. ...
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