{"id":2815,"date":"2011-01-10T07:17:00","date_gmt":"2011-01-10T14:17:00","guid":{"rendered":"http:\/\/www.jasonapollovoss.local\/?p=2815"},"modified":"2018-08-16T17:22:44","modified_gmt":"2018-08-16T21:22:44","slug":"economists-say-more-banking-rules-please","status":"publish","type":"post","link":"https:\/\/jasonapollovoss.com\/web\/2011\/01\/10\/economists-say-more-banking-rules-please\/","title":{"rendered":"Economists say, &#8220;more banking rules, please&#8221;"},"content":{"rendered":"<p><span style=\"font-size: 16px;\">Over the last several days the annual meeting of the American Economic Association has been taking place in my hometown of Denver.\u00a0 A recurring theme is developing as presenter after presenter talks about their work.\u00a0 That theme is that there needs to be more reform for banking laws.\u00a0 Specifically the professors are saying the following:<\/span><\/p>\n<ul>\n<li><span style=\"font-size: 16px;\">hedge funds still are not regulated enough and how will failure at these institutions be dealt with by regulators?<\/span><\/li>\n<\/ul>\n<p style=\"padding-left: 30px;\"><span style=\"font-size: 16px;\">My comment: one of the problems for regulators is that by stating how they would deal with a crisis at a hedge fund, the hedge funds will then know exactly how they can skirt any rules.\u00a0 Better: for regulators to have a plan in place but not disclose the details until it becomes necessary.<\/span><\/p>\n<ul>\n<li><span style=\"font-size: 16px;\">the new equity capital requirements don&#8217;t provide that much of an increase in the safety of banking institutions<\/span><\/li>\n<\/ul>\n<p style=\"padding-left: 30px;\"><span style=\"font-size: 16px;\">I agree.\u00a0 The big complaint from banks is that the more money they hold in equity = less money for lending.\u00a0 They argue that less supply of lended funds will result in higher interest rates.\u00a0 Duh!\u00a0 But that begs the question: is that necessarily a bad thing?\u00a0 The price of money &#8211; i.e. interest rates &#8211; has been artificially too low for too long.\u00a0 Interest rates are supposed to reflect the risk of the borrower, but ironically, low interest rates have really related the risk of the entire banking system.<\/span><\/p>\n<ul>\n<li><span style=\"font-size: 16px;\">the new regulations are not simple enough<\/span><\/li>\n<\/ul>\n<p style=\"padding-left: 30px;\"><span style=\"font-size: 16px;\">I agree.\u00a0 I am all for simple regulations.\u00a0 The more complex a regulation is then the more likely it is that there are loop holes.\u00a0 Then banking institutions\u00a0can claim ignorance of &#8220;how to implement&#8221; the rules properly when things go badly.<\/span><\/p>\n<ul>\n<li><span style=\"font-size: 16px;\">clarity about how governments will handle another crisis at the level of the individual bank<\/span><\/li>\n<\/ul>\n<p style=\"padding-left: 30px;\"><span style=\"font-size: 16px;\">Disagree.\u00a0 See my above comments.<\/span><\/p>\n<ul>\n<li><span style=\"font-size: 16px;\">banks over reliance on financing themselves with short-term debt<\/span><\/li>\n<\/ul>\n<p style=\"padding-left: 30px;\"><span style=\"font-size: 16px;\">Totally agree.\u00a0 This strategy is designed to increase profits because the spread between the cost of borrowing at the institution vs. its profits from lending, is higher.\u00a0 The problem is what happens when debt markets seize up (hello! Lehman Brothers)?<\/span><\/p>\n<p><span style=\"font-size: 16px;\">As long-term readers of this blog know, I feel that an ethical, flexible regulatory\u00a0framework is essential for the functioning of capitalism.\u00a0 Kudos to the economists for speaking up about the need for more reform.<\/span><\/p>\n<p><span style=\"font-size: 16px;\">Jason<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Over the last several days the annual meeting of the American Economic Association has been taking place in my hometown of Denver.\u00a0 A recurring theme is developing as presenter after presenter talks about their work.\u00a0 That theme is that there needs to be more reform for banking laws.\u00a0 Specifically the professors are saying the following: [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[3],"tags":[],"class_list":["post-2815","post","type-post","status-publish","format-standard","hentry","category-the-blog"],"_links":{"self":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts\/2815","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/comments?post=2815"}],"version-history":[{"count":0,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts\/2815\/revisions"}],"wp:attachment":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/media?parent=2815"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/categories?post=2815"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/tags?post=2815"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}