While Jamie Dimon is right that a free market system should be preferred, he is misguided in his claim that capital requirements interfere with that system. Instead, they lower risk and prevent the need for more substantial government interference, like bank bailouts.
News and Commentary
AEI’s Paul Kupiec explains why the Federal Reserve’s plan to pay different rates to banks depending on their type is flawed. Designed to not reward the business structure of narrow banks, this level of discretionary power would go well beyond the Fed’s proper authority.
The BPI staff wrote a response to the recent Washington Post story on leveraged loans. They argue that the Post misses the mark by overestimating the effects of previous regulatory guidance and misunderstanding the level of risk actually associated with leveraged lending.
The New York Fed is writing a blog series on first time home buyers. The first post showed that the current rate of first time buyers was roughly equal to the rate in the early 2000s. The second post discovered that, despite higher student loans and mortgage balances, first-time buyers have higher credit scores than they used to.
Also related to the OCC, Paulina Gonzalez-Brito, from the California Reinvestment Coalition, wrote that her organization was publicly reprimanded by the OCC for speaking publicly against a proposed rule. She argues that it is just an example of a lack of transparency and accountability by the OCC.
AEI’s Peter Wallison and Edward Pinto took to the Wall Street Journal to argue that the Trump administration’s recent housing memo would recreate the environment that led to the 2008 crisis. By continuing to prop up Fannie and Freddie and mandate affordable-housing requirements, they encourage the GSEs to engage in risky mortgage lending.
How does the news effect equity market prices? A new NBER report built a news tracker that determined that policy news have strong effects on market volatility, but the exact area of policy focus changes.