by Summary:
More commentary on the current banking reform bill (S.2155) from the unqualified. But we can treat as revealing none the less.... The central feature of the leverage ratio is that it makes no distinction between assets and exposures. The Bill proposes that policy depart from that simple system. In particular, it proposes that reserves (broadly, deposits) held by banks with the Federal Reserve should be excluded from ‘total assets’. ... the SRC recognises that there are special circumstances where reserves should be excluded from ‘total assets’ in order to remove a binding constraint on quantitative easing (QE)[1]. But SRC believes that such relaxations of regulatory requirements should be temporary and clearly necessary. Those legislators who were concerned about QE should be wary of
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More commentary on the current banking reform bill (S.2155) from the unqualified. But we can treat as revealing none the less.... The central feature of the leverage ratio is that it makes no distinction between assets and exposures. The Bill proposes that policy depart from that simple system. In particular, it proposes that reserves (broadly, deposits) held by banks with the Federal Reserve should be excluded from ‘total assets’. ... the SRC recognises that there are special circumstances where reserves should be excluded from ‘total assets’ in order to remove a binding constraint on quantitative easing (QE)[1]. But SRC believes that such relaxations of regulatory requirements should be temporary and clearly necessary. Those legislators who were concerned about QE should be wary of
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Mike Norman considers the following as important:
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More commentary on the current banking reform bill (S.2155) from the unqualified. But we can treat as revealing none the less....
The central feature of the leverage ratio is that it makes no distinction between assets and exposures. The Bill proposes that policy depart from that simple system. In particular, it proposes that reserves (broadly, deposits) held by banks with the Federal Reserve should be excluded from ‘total assets’.
... the SRC recognises that there are special circumstances where reserves should be excluded from ‘total assets’ in order to remove a binding constraint on quantitative easing (QE)[1]. But SRC believes that such relaxations of regulatory requirements should be temporary and clearly necessary. Those legislators who were concerned about QE should be wary of making a permanent change to the leverage ratio that would make QE easier for the central bank.
Technically, the central bank cannot use QE to create more reserves than is consistent with the leverage ratio. [Ed. Whaaaaaaaaatttt??????] That is because where QE is used to buy securities from non-banks, the total assets of banks are increased, raising actual levels of leverage. [Ed. ?????????]
There is no 'binding constraint' on QE.... unless they mean crashing the whole system is a 'constraint' ..... I guess to these morons that constitutes a "constraint" LOL!... "hey! we just bankrupted all the banks by adding all these $1T reserves for them to lend out! .. boy are they ever 'constrained' now!..."
What a bunch of f-ing morons...
And then what about when short term fiscal surpluses often develop and have the same effect on Depositories morons?
Checkmate.... again... :p