Removing the arbitrary size designation for bank SIFIs would reduce costly regulation for regionals, encourage industrywide competition and concentrate regulators' efforts on firms that actually warrant attention.
The $22.5 billion Structured Agency Credit Risk transaction serves its purpose, but shows how much more work and thinking needs to be done to redesign the housing finance system.
The $22.5 billion Structured Agency Credit Risk transaction serves its purpose, but shows how much more work and thinking needs to be done to redesign the housing finance system.
The proposal has calculations that would address deficiencies, but also tries to balance risk sensitivity with not making the derivatives counterparty charges overly complex.
Lower borrowing costs for the biggest institutions based on perceived government support encourage these institutions to grow larger and more systemically important. This dynamic also puts community banks at a competitive disadvantage.
Modern banking exposes our financial system to considerable risks. Government attempts to contain these risks exacerbate them. Heres a proposed alternative: A Depositary that stores money for a fee without lending.
Governments need to consider the advantages of a good bank-bad bank restructuring while loan assets currently have determinable and probably higher values than earlier in the crisis.
