News and Commentary
In an episode of the Macro Musings podcast, host David Beckworth talks with Mercatus’ Larry White on stablecoins, money market funds, and the history of free banking.
In an article in National Review’s Capital Matters section, Kevin Erdmann argues that the Fed should “speed up housing construction, by supporting strong economic growth and generous credit markets” in order to combat the current housing shortage.
In an article for VoxEU, Charles Goodhart argues that “the application of limited liability to the shareholders of publicly listed private-sector corporations” is an example of moral hazard. He argues that “creating a system where managerial staff and other shareholders are incentivized to adhere to best practice to protect themselves, as well as the firm in question” is the optimal solution to this problem.
New Research
In a paper for the Center of Economic Research at ETH Zurich, Florian Boser and Hans Gersbach compare bank leverage constraints from regulatory capital requirements and central bank collateral requirements in reserve lending facilities. To do so, they use “a bank money creation model in which central bank reserves have to be acquired to settle interbank liabilities. They find that “monetary policy via collateral requirements leads to a unique collateral leverage channel, which cannot be replicated by standard capital requirements” and through which “banks can expand loan supply and deposit issuance when they face liquidity constraints, by raising the collateral value of their loans with tighter monitoring of firms.”
In a paper for NBER, René M. Stulz, James G. Tompkins, Rohan Williamson, Zhongxia (Shelly) Ye investigate why bank boards have risk committees. They find that “many large and complex banks voluntarily chose to have a risk committee before the Dodd-Frank Act” and “establishing a board risk committee does not reduce a bank’s risk on average.”
In a paper for NBER, Adam Copeland, Darrell Duffie, and Yilin Yang examine how “The Federal Reserve’s balance-sheet normalization…increased repo rate distortions, the severity of rate spikes, and intraday payment timing stresses, culminating with a significant disruption in Treasury repo markets mid-September 2019.” They argue that “substantially higher aggregate levels of reserves than existed in the period leading up to September 2019 would likely have eliminated most or all of these payment timing stresses and repo rate spikes.”
Loading...