News and Commentary
In an article in The Wall Street Journal, Kate Davidson and Andrew Restuccia covers Biden’s impending nomination of Graham Steele to be assistant Treasury secretary for financial institutions. The authors cover Steele’s progressive views and discuss what that may mean for the Biden Administration’s handling of financial regulation.
In an article for American Banker, Kate Berry covers the responses of nonbank lenders to a Ginnie Mae proposal to impose risk-based capital requirements for nonbanks.
In a blog post, John Cochrane comments on the growing desire by lawmakers and regulators to incorporate climate risks into US financial regulation. He argues that climate risks “have never come close to causing systemic financial crises.” He then argues that incorporating climate regulatory risks is more reasonable, but believes such risks are highly unlikely to be systemic. Likewise, he also is not concerned about systemic risks arising from the transition to a low-carbon energy world. Cochrane argues that “climate financial regulation is an answer in search of a question.”
In a column for VoxEU, Kathryn Judge and Anil Kashyap discuss how to resolve regulatory weaknesses in the US financial market that were revealed during the COVID-19 pandemic. Their primary solutions to these problems entail improvements to the Financial Stability Oversight Council’s mission and leadership.
In a column for VoxEU, Maurizio Trapanese argues for a new comprehensive framework to control systemic risk associated with non-bank financial intermediation. The primary elements of this framework includes determining the correct pricing of backstops, resolving the tradeoff between systemic risk and intermediation costs, mitigating the risk of runs on money market funds, resolving agency problems, and enhancing stress test tools.
New Research
In a new Fed research paper, Jose M. Berrospide, Arun Gupta, and Matthew P. Seay research how banks with regulatory capital buffers beyond the minimum capital requirements performed during the COVID-19 pandemic compared to “buffer-unconstrained” banks. Their research shows that the former were more likely to curb lending to creditworthy small and mid-sized enterprises, suggesting that capital buffers went unused.
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