by Something else to keep an eye on as part of changes to bank regulation.Doesn't understand the QE effects causing the GFC and subsequent credit contraction but not too bad otherwise; gets the direction right anyway: One large downside to Dodd-Frank was that in order to hold the required capital, all banks decreased lending to shore-up their liquid holdings and meet the regulatory minimums. Without the ability to borrow funds, small businesses have a hard time raising money to create business. Growth in the larger economy is hampered by the absence of capital. Another downstream effect of banks needing to increase their liquid holdings was exponentially worse. Less liquid large banks needed to purchase and absorb the financial assets of more liquid large banks in order to meet
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Something else to keep an eye on as part of changes to bank regulation.
Doesn't understand the QE effects causing the GFC and subsequent credit contraction but not too bad otherwise; gets the direction right anyway:
One large downside to Dodd-Frank was that in order to hold the required capital, all banks decreased lending to shore-up their liquid holdings and meet the regulatory minimums.
Without the ability to borrow funds, small businesses have a hard time raising money to create business. Growth in the larger economy is hampered by the absence of capital.
Another downstream effect of banks needing to increase their liquid holdings was exponentially worse. Less liquid large banks needed to purchase and absorb the financial assets of more liquid large banks in order to meet the regulatory requirements.
That’s the underlying problem for a Glass-Steagall type of regulation now.
The Democrats created Dodd-Frank which: #1 generated constraints on the economy (less lending), #2 made fewer banking options available (banks merged), #3 made top banks even bigger.
This problem is why President Trump and Secretary Mnuchin are working to create a parallel banking system of community and credit union banks, individually less than $40 billion in assets, that are external to Dodd Frank regulations and can act as the primary commercial banks for small to mid-sized businesses.
So they might be foregoing the current proposed policy change of elimination of risk-free assets in the computation of the Leverage Ratio for the big banks and instead creating a parallel small banking system with that regulatory feature.
Have to keep an eye on this going forward... imo this area of policy adjustment is more important in scale to the economy short-term than the current tax reform proposals which seem to be getting all the attention.
Pocahontas Financial Control Scheme Returns To Bite Its Creator… https://t.co/10Xc8jzhkK pic.twitter.com/AToACOk0D3— TheLastRefuge (@TheLastRefuge2) November 19, 2017