This Week in Financial Regulation, October 22nd

This Week in Financial Regulation, October 22nd

News and Commentary

On VoxEU’s economics podcast, Maurice Obstfeld talks with Tim Phillips about the history of financial globalization and its future.

The Cato Institute’s Norbert Michel comments on indications that the Fed will incorporate climate factors in its stress tests. “Given the state of both climate models and financial forecasting methods, forcing financial firms to account for climate risks to satisfy federal rules is sheer lunacy.”

Katy O’Donnell reports for Politico on Democrats’ intra-party rumblings over aid to homebuyers.

In a column at the Washington Post, Charles Lane weighs in on President Biden’s nominee for comptroller of the currency. “Centrist Democratic senators could — and should — use this nomination to demonstrate the limits of their party’s progressive drift.”


New Research

In an NBER working paper, Sabrina T. Howell, Theresa Kuchler, David Snitkof, Johannes Stroebel, and Jun Wong assess racial dynamics in Paycheck Protection Program loans, finding that “smaller banks were much less likely to lend to Black-owned firms, while the Top-4 banks exhibited little to no disparity after including controls” and “that when small banks automate their lending processes, and thus reduce human involvement in the loan origination process, their rate of PPP lending to Black-owned businesses increases.”

At VoxEU, Davide Porcellacchia hones in on banking-optimal interest rates: “low rates harm bank profits by squeezing interest margins, but also boost the value of long-term assets held by banks . . . Past [a] tipping point, the net effect of low rates on bank capital is negative. Applying the model to the US economy, the tipping point in August 2007 is estimated as a policy rate of 0.55%.”

In another NBER paper, Thomas Kroen, Ernest Liu, Atif R. Mian, and Amir Sufi assess low interest rates’ effects on market concentration: “Using data on firm financials and high frequency monetary policy shocks, we find that falling interest rates disproportionately benefit industry leaders, especially when the initial interest rate is already low.”

For the Bank Policy Institute, Bill Nelson and Gonzalo Fernandez Dionis consider a historical method employed by the Fed to assess banks’ capital and liquidity, and how it would find today’s banks: “In aggregate, larger banks, GSIBs, banks subject to capital stress tests and banks subject to liquidity requirements all have more capital than required by the [historical assessment metric].”

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By |2021-10-28T08:36:34-07:00October 22nd, 2021|Blog, Financial Regulation|