News and Commentary
Bill Nelson and Greg Baer at the Bank Policy Institute argue the Fed Board should set the reserve requirement to zero and is legally required to do so if the conclusions of a recent staff study are correct. They point to benefits such as increased credit supply and reduced liquidity risk while concluding to have “identified a gigantic free lunch.”
Last week, Michael Bloomberg announced financial regulation proposals for his presidential campaign platform. The New York Times reports that the candidate committed to order the Justice Department to prosecute individuals for corporate crimes more aggressively if elected president. Other policies include merging Fannie Mae and Freddie Mac and a 0.1 percent tax on all financial transactions. You can find a quick summary of all the proposals here.
Neil Haggerty at American Banker covers the responses to Bloomberg’s policy plan by various financial industry observers. Some argued that even with these progressive plans, Bloomberg would probably still be the favorite Democratic candidate among the banks. Wall Street’s comfort would probably be bolstered by his actual record as mayor of New York City.
American Action Forum’s Douglas Holtz-Eakin reviews Bloomberg’s policy on housing government-sponsored enterprises. He concludes that the proposal to merge Fannie and Freddie into a single government corporation is a bad plan that involves a lot of explicit debt and potential problems for customer service down the road.