This Week in Financial Regulation, July 29th

This Week in Financial Regulation, July 29th

News and Commentary

Jeanna Smialek and Deborah B. Solomon write in The New York Times about how the Federal Reserve’s bailout of hedge funds during the COVID-19 economic shock reveals a critical gap in the Dodd-Frank financial reform law.

In a Cato Institute series on the New Deal and America’s recovery from the Great Depression, George Selgin writes about the banking crisis that crashed the entire financial system of the 1920s.

In a video from the Financial Stability Board, Randal K. Quarles discusses the board’s recent evaluation of the post-2008 financial crisis reforms to the global financial system and examines the too-big-to-fail question.

Greg Baer writes in a blog post for the Bank Policy Institute about the future of capital requirements in the U.S. financial system and the inherent tension between dynamism and procyclicality concluding that, “the Federal Reserve should commit to implementing the stress capital buffer (SCB) to govern capital distributions for the fourth quarter.”

Norbert Michel writes in an opinion piece for Forbes about the recently finalized regulation from the Federal Housing Finance Agency that sets capital requirements for Fannie Mae and Freddie Mac, the nation’s two government-sponsored enterprises (GSEs) that operate in the secondary mortgage market. Michel praises the new requirements as being a positive step towards ensuring that the stability of the GSEs.

In a video from the American Action Forum, Thomas Wade discusses the impacts of Dodd-Frank, ten years after the law’s passage.


New Research

A new working paper from the National Bureau of Economic Research examines why borrowers default on their mortgages and finds that only 3% of defaults are caused exclusively by negative equity and that, “adverse events are a necessary condition for 97 percent of mortgage defaults.”

A working paper from the Mercatus Center examines whether Dodd-Frank is the biggest law of all time in terms of the number of regulations resulting from the law. The authors conclude that the length and complexity of financial laws like Dodd-Frank can lead to worsened quality of regulations implementing the law.

An NBER working paper by Benjamin Bennett, René M. Stulz, and Zexi Wang examines whether joining the S&P 500 index harms a firm finding that the long-run impact of inclusion in the index results in worsened stock price informativeness and governance.

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By |2020-07-29T17:22:02-07:00July 29th, 2020|Blog, Financial Regulation|