News and Commentary
An op-ed in The Hill by Laura Kodres argues that 10 years after Dodd-Frank, we need to rethink the legislation. Specifically, she argues for reexamining the Volcker Rule, the role of public vs private financing for mortgages, and making uniform the treatment of “shadow banks” and more traditional financial institutions.
In a similar vein, Satyajit Das argues that while the “shadow banking” sector has escaped the same regulatory treatment as traditional financial institutions, there are inherent difficulties in regulating them. Even traditional banks benefit from having non-bank lenders to help them in lean times, and their preferable regulatory treatment makes them attractive alternatives that fill the gaps traditional banks can’t.
The Federal Reserve is currently seeking comments on a proposed regulation that would impose risk-based capital requirements for bank holding companies that are involved in insurance payments, which would restrict dividend payments and bonuses for institutions that fail to meet the minimum requirement.
New Research
A new paper from the University of Pennsylvania asks an interesting question: considering the relative decline in the role of banking institutions in issuing mortgages, does the Community Reinvestment Act still matter? Yes. It finds that the share of loans to low and middle-income borrowers has declined since 2004.
A new paper from the Journal of Financial Stability has constructed a machine learning model to predict financial crises. Using data from the most recent financial crisis, it would have predicted the 2007/2008 crash.
New research finds that when policy uncertainty increases, corporate debt maturity decreases, though the effects are not the same for all firms. Larger firms increase their debt maturity, while cash-strapped ones increase short-term debt.
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