Finanz und Wirtschaft, December 13, 2017. PDF. Ökonomenstimme, December 15, 2017. HTML.
Regulation is about aligning private and social trade-offs.
When banks cause negative externalities, good regulatory interventions increase banks’ costs.
Externalities may differ across countries, so nothing suggests that regulation induced costs should be the same internationally.
This entry was posted in Contributions and tagged Bank regulation, Competition, Externality, Pigouvian tax, Regulation on December 15, 2017 by Dirk Niepelt.
In the FT, Jamie Smyth reports that the Australian Securities Exchange plans to introduce a blockchain based equity clearing and settlement system.
ASX will operate the system on a secure private network with known participants. The participants must comply with regulation, according to the ASX, which said its system had nothing to do with blockchain technology deployed by cryptocurrencies such as bitcoin.
This entry was posted in Notes and tagged Australia, Blockchain, Equity, Regulation, Settlement system on December 8, 2017 by Dirk Niepelt.
On his blog, John Cochrane happily reports about apparent agreement between Larry Summers and himself regarding the dangers of regulatory overkill and incompetence of government officials.
This is a watershed. Here is the kind of reach out for middle ground that could unlock our political and economic sclerosis. Larry is likely to be in government again sooner or later, and I hope he will push hard for this — and with more effect than the last hundred or so anti-red-tape and regulatory reform commissions.
This entry was posted in Notes and tagged Massachusetts, Regulation, United States on June 1, 2016 by Dirk Niepelt.
In a VoxEU post, Stefan Gerlach and Peter Kugler discuss the experience of Switzerland during the free banking era in the second half of the 19th century.
This entry was posted in Notes and tagged Bank, Free banking, Money supply, Regulation, Swiss National Bank, Switzerland on March 2, 2016 by Dirk Niepelt.
In a blog post, Gilles Saint-Paul describes how organized crime exploits the arbitrage opportunities that (bad) regulation creates.
He predicts that eliminating cash transactions by decree, along the lines of policy proposals currently en vogue, will lead organized crime to establish alternative, sound mediums of exchange that the general public might adopt.
This entry was posted in Notes and tagged Cash, Organized crime, Regulation, Regulatory arbitrage on October 16, 2015 by Dirk Niepelt.
Monetary policy was too loose before the crisis.
The policy responses during the crisis saw more—counter productive—temporary and discretionary measures. Taylor argues that the Reinhart-Rogoff “weak recovery is normal” and the Summers “secular stagnation” views are inconsistent with the data.
This entry was posted in Notes and tagged Bailout, Financial crisis, Monetary policy, Regulation on November 10, 2014 by Dirk Niepelt.
The “Greenspan put” fostered risk-taking and overconfidence.
Low interest rates and the search for yield led to a lowering of lending standards and stronger demand for mortgages; a rise in housing wealth accompanied falling household incomes. The Fed’s strong policy response to the Great Recession may create new risks.
The 1980s savings and loans crisis led to stronger reliance on the originate to distribute model and securitisation of mortgages. Market participants lost sight of the risks. Regulatory incentives led banks to take the securitised loans back on their balance sheets and additional sources of maturity mismatch arose from strong reliance on short-term funding.
The “self-correcting markets myth” led Congress to deregulate financial services. The Gramm-Leach-Bliley Act fostered competition and consolidation; the Commodity Futures Modernization Act loosened oversight over the OTC derivatives market. Financial regulators also relaxed restrictions; Basel II replaced standardised regulator-set capital charges with internal models of banks.The Dodd-Frank Act reversed this trend, allowing for more discretion and micro-management.
The pre-crisis incentives led to large, “too-big-to-fail” institutions and bred moral hazard. Dodd-Frank improve things, by establishing consolidated oversight, living will requirements, enhanced prudential standards and enabling the FDIC to resolve systemic entities that cannot be resolved safely in bankruptcy. Clearing houses may require more regulation.
This entry was posted in Notes and tagged Dodd-Frank act, FDIC, Federal Reserve, Financial crisis, Regulation, Securitisation, Too-big-to-fail on November 9, 2014 by Dirk Niepelt.
institutions that enhance people’s economic lives, such as central banks, deposit insurance and stock exchanges, are not the products of careful design in calm times, but are cobbled together at the bottom of financial cliffs. Often what starts out as a post-crisis sticking plaster becomes a permanent feature of the system. … The response to a crisis follows a familiar pattern. It starts with blame. New parts of the financial system are vilified: a new type of bank, investor or asset is identified as the culprit and is then banned or regulated out of existence. It ends by entrenching public backing for private markets: other parts of finance deemed essential are given more state support.
Hamilton’s bank bailout in 1792.
The creation of joint-stock banks in England after the “emerging markets” crisis of 1825.
The railroad crash of 1857, global panic and the Bank of England’s stricter requirements for discount houses to hold cash.
Financial fraud and low cash holdings, the 1907 panic, the National Monetary Commission’s demand for a lender of last resort and the 1913 Federal Reserve Act establishing the (third) central bank in the US.
Recession and financial meltdown in 1929, the bank holiday of 1933, publicly funded bank recapitalization, Glass-Steagall and the FDIC.
This entry was posted in Notes and tagged *, Alexander Hamilton, Bank of England, FDIC, Federal Reserve, Finance, Glass-Steagall, Recapitalisation, Regulation, Reserve requirement on April 14, 2014 by Dirk Niepelt.