This Week in Financial Regulation, June 30th

This Week in Financial Regulation, June 30th

News and Commentary

In an article in Bloomberg, Nicholas Comfort and Steven Arons discuss the European Central Bank’s threats of increased capital requirements levied against Deutsche Bank for its highly leveraged loans.

In an Op-Ed at AEI, Desmond Lachman argues that the US’ next economic crisis will be a massive asset price bubble. He claims that the US economy is currently in both a housing bubble and an equity bubble. Lachman alleges that the Fed and its overly loose monetary policy is responsible.

In a letter to the editors of The Wall Street Journal, Desmond Lachman responds to their recent opinion piece on the credibility challenges currently facing the Fed.


New Research

In an article for the Bank Policy Institute, Francisco Covas and Gonzalo Fernandez Dionis examine the 2021 DFAST stress test results released by the Fed. They argue that the tests results prove that major US banks are resilient in extreme stress scenarios. Since “stressed regulatory capital ratios of all banks remained well above minimum capital requirements…large banks will no longer be subject to restrictions on capital distributions beyond those envisioned by the stress capital buffer framework.”

In a new NBER paper, Xavier Gabaix & Ralph S. J. Koijen develop a framework to understand the origins of fluctuations in the stock market. The authors “analyze how key parts of macro-finance change if markets are inelastic” and “show how general equilibrium models and pricing kernels can be generalized to incorporate flows, which makes them amenable to use in more realistic macroeconomic models and to policy analysis”

In a new NBER paper, Howard Kunreuther and Jason Schupp provide a framework for the role insurance could play in managing business interruption and other risks that may arise in any future pandemics.

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By |2021-07-07T08:34:09-07:00June 30th, 2021|Blog, Financial Regulation|