News and Commentary
1. John Cochrane, “The Grumpy Economist,” was interviewed by the Chicago Booth Review. He makes an important point about the role of equity financing and “risky” investments. As long as a bank is sufficiently capitalized, less regulation of the investments themselves is necessary.
2. AEI’s Paul Kupiec on The Narrow Bank’s master account denial. Though the Fed started paying interest on extra reserves (IOER) in 2008, this hasn’t materialized into upward pressure on interest rates for ordinary savers. TNB’s business model was to pass as much of that as possible onto ordinary savers, while doing nothing else, making it as safe as a bank can be.
3. Democrats are chomping at the bit to undo Republican rollbacks of financial regulation. Their proposals include modifying the Volcker Rule and greater consumer protection. Notably absent? Higher capital requirements.