Comments on: Capping bank size http://blogs.reuters.com/felix-salmon/2009/12/07/capping-bank-size/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: DavidMerkel http://blogs.reuters.com/felix-salmon/2009/12/07/capping-bank-size/comment-page-1/#comment-9746 Wed, 09 Dec 2009 15:22:51 +0000 http://blogs.reuters.com/felix-salmon/2009/12/07/capping-bank-size/#comment-9746 Here are my thoughts on the matter — please ignore the annoyed thoughts at the bottom about electing Fed governors.

http://alephblog.com/2009/11/11/how-to-r egulate-the-banks-and-other-financials/

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By: BZ-RealEcon http://blogs.reuters.com/felix-salmon/2009/12/07/capping-bank-size/comment-page-1/#comment-9687 Tue, 08 Dec 2009 17:07:44 +0000 http://blogs.reuters.com/felix-salmon/2009/12/07/capping-bank-size/#comment-9687 Yes both a liabilities cap and a risk-adjusted leverage cap are necessary, but the devil is in the details as risk-adjusted leverage can be measured in many ways.

Some suggestions from my recent paper:

Regulators should be given the powers necessary to regulate the leverage cycle to account for the problems of systemic risk, moral hazard, informational asymmetries, and heterogeneity of assets within a risk-weighting that plague current regulations. Policies such as harsher penalties for firms that do not comply with the minimum capital-to-asset ratio, minimum margin requirements, diversification of cash flow, and increase the compensation for government regulation jobs would all help to mitigate the negative effects of the leverage cycle.

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By: OnTheTimes http://blogs.reuters.com/felix-salmon/2009/12/07/capping-bank-size/comment-page-1/#comment-9659 Mon, 07 Dec 2009 22:46:10 +0000 http://blogs.reuters.com/felix-salmon/2009/12/07/capping-bank-size/#comment-9659 What’s worse for the financial system, a $100B bank that is severely under-capitalized, or a $500B that is responsibly funded? Rather than focus on the size of the bank, we should be concerned with how much exposure the FDIC, the Fed, and other banks have to any one bank. If we limit the amount a bank can borrow from the Fed as a percentage of their capital (and that limit should increase with size), and also limit the percentage of capital that any bank can loan to any one bank, the risk of systemic failure is reduced. We should also take into account downstream lending, where Bank A lends to Bank B and Bank C, and bank B also lends to bank C.

I just don’t think we’re better off with a bunch of small under-capitalized banks than a few giant well-managed ones (of course, we’ll have to find those well-managed giant banks, but let’s not rule it out).

www.onthetimes.com

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By: q_is_too_short http://blogs.reuters.com/felix-salmon/2009/12/07/capping-bank-size/comment-page-1/#comment-9656 Mon, 07 Dec 2009 21:05:33 +0000 http://blogs.reuters.com/felix-salmon/2009/12/07/capping-bank-size/#comment-9656 $300 billion is close to $500 billion? you are a funny man.

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