What should happen with Fannie Mae and Freddie Mac? Their conservatorship status gets in the way of making sound policy and poses a threat to the rule of law.
News and Commentary
Pro Market, the blog for the Stigler Center, posted a column looking at the relationship between finance and inequality. They found that increased finance decreases inequality, but once the financial industry gets to a certain size, inequality increases.
John Cochrane has two posts criticizing the Fed for their disdain for narrow banks. The first explains why it is ridiculous they are so concerned about a completely safe business strategy. The second uses data from multiple countries to show that retail deposit markets are an oligopoly. You can find the Fed’s report on the issue here.
Mercatus’s podcast, The Bridge, discussed what a resilient banking system would look like.
Martin Wolf explains how financial regulation is pro cyclical, and why that is a bad thing. Political pressures and shifting market structures lead to reduced regulation during cyclical peaks, leaving the system unprepared for a downturn.
AEI’s Desmond Lachman believes that low interest rates and political opposition to quantitative easing leave the US unprepared to deal with the next economic downturn.
How effective have recent financial reforms been? The Bank for International Settlements has a new tool that combines analysis from around the world to measure the effects of current regulatory regimes.
The Basel Committee has released their most recent results from their monitoring exercises. With continued increases in capital requirements and other regulations, the global financial system continues to get safer.