Comments on: Why the Fed won’t be good at bank regulation http://blogs.reuters.com/felix-salmon/2011/05/06/why-the-fed-wont-be-good-at-bank-regulation/ A slice of lime in the soda Sat, 25 May 2013 16:48:33 +0000 hourly 1 http://wordpress.org/?v=3.4.2 By: crocodilechuck http://blogs.reuters.com/felix-salmon/2011/05/06/why-the-fed-wont-be-good-at-bank-regulation/comment-page-1/#comment-26343 crocodilechuck Fri, 06 May 2011 21:44:06 +0000 http://blogs.reuters.com/felix-salmon/?p=8157#comment-26343 Additional data point: in Australia, deposit taking institutions are regulated by the Australian Prudential Regulation Authority (established after the Wallis Inquiry, '98). The so called 'Big Four' banks have some of the highest levels of Tier One Capital on Earth (as a percentage of total capital.) Additional data point: in Australia, deposit taking institutions are regulated by the Australian Prudential Regulation Authority (established after the Wallis Inquiry, ’98). The so called ‘Big Four’ banks have some of the highest levels of Tier One Capital on Earth (as a percentage of total capital.)

]]> By: MyLord http://blogs.reuters.com/felix-salmon/2011/05/06/why-the-fed-wont-be-good-at-bank-regulation/comment-page-1/#comment-26334 MyLord Fri, 06 May 2011 19:04:12 +0000 http://blogs.reuters.com/felix-salmon/?p=8157#comment-26334 But bank regulation shouldn't be pro-cyclical. It should operate anticipatorially. The time to raise loss ratios is when losses are low; waiting until they appear is backward looking, a problem with monetary policy as well. But bank regulation shouldn’t be pro-cyclical. It should operate anticipatorially. The time to raise loss ratios is when losses are low; waiting until they appear is backward looking, a problem with monetary policy as well.

]]> By: KenG_CA http://blogs.reuters.com/felix-salmon/2011/05/06/why-the-fed-wont-be-good-at-bank-regulation/comment-page-1/#comment-26326 KenG_CA Fri, 06 May 2011 16:03:44 +0000 http://blogs.reuters.com/felix-salmon/?p=8157#comment-26326 The Fed should regulate banks that borrow money from it, just like any other bank that sets rules for borrowers. For instance, if you use any of the Fed's services, you shouldn't be allowed to make really stupid loans, like no money down, no docs ARMs to people who obviously won't be able to make the payments. Even insurance companies regulate personal and corporate behavior, because they tell you what you can and can not do if you want insurance. Why shouldn't a central bank be allowed to set rules for banks that borrow from it, even overnight? The Fed should regulate banks that borrow money from it, just like any other bank that sets rules for borrowers. For instance, if you use any of the Fed’s services, you shouldn’t be allowed to make really stupid loans, like no money down, no docs ARMs to people who obviously won’t be able to make the payments.

Even insurance companies regulate personal and corporate behavior, because they tell you what you can and can not do if you want insurance. Why shouldn’t a central bank be allowed to set rules for banks that borrow from it, even overnight?

]]> By: Sandrew http://blogs.reuters.com/felix-salmon/2011/05/06/why-the-fed-wont-be-good-at-bank-regulation/comment-page-1/#comment-26324 Sandrew Fri, 06 May 2011 15:40:17 +0000 http://blogs.reuters.com/felix-salmon/?p=8157#comment-26324 While the Fed's supervisory role has certainly gotten short shrift to monetary policy, I don't share Winecoff's cynicism that this paradigm is a structural feature that will persist for as long as the central bank plays both roles. But improving the Fed-as-regulator can't begin until we reject the premise that prudential regulation is necessarily pro-cyclical. The Fed ought to view prudential regulation as another tool in its belt--one that can be wielded more delicately and in a more targeted manner than rate targets and QE. A light touch when times are rough, but strict in those heady periods when risk premia evaporate. Basel is wise to this thinking. It remains to be seen whether the Fed is too. While the Fed’s supervisory role has certainly gotten short shrift to monetary policy, I don’t share Winecoff’s cynicism that this paradigm is a structural feature that will persist for as long as the central bank plays both roles. But improving the Fed-as-regulator can’t begin until we reject the premise that prudential regulation is necessarily pro-cyclical. The Fed ought to view prudential regulation as another tool in its belt–one that can be wielded more delicately and in a more targeted manner than rate targets and QE. A light touch when times are rough, but strict in those heady periods when risk premia evaporate. Basel is wise to this thinking. It remains to be seen whether the Fed is too.

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