BTCNews on Nostr: Bank Leverage, Regulatory Capital, and the Illusion of Safety @tom_hoenig / Medium ...
Bank Leverage, Regulatory Capital, and the Illusion of Safety
@tom_hoenig / Medium
https://btcnews.today/2023-03-16/1223#1223
#bitcoin
"Following generations of taxpayer support and government involvement, politicians, regulators, and lobbyists have supplanted the market in determining what counts as capital, how it is calculated, and how much is enough. This artificial mechanism has resulted in a decline of both the level and quality of capital among the world’s largest banks. As the regulators have supplanted the market in setting bank capital standards, they increasingly rely on ever more arcane and complicated methods to determine how much capital a bank should hold. They assign risk weighs to the different asset categories held by banks. In contrast, the absence of the largest banks having sufficient equity capital as they entered the Great Recession, required governments to infuse public funds into many of them. It will be at significant public cost if that lesson must be relearned should bank capital weaken."
@tom_hoenig / Medium
https://btcnews.today/2023-03-16/1223#1223
#bitcoin
"Following generations of taxpayer support and government involvement, politicians, regulators, and lobbyists have supplanted the market in determining what counts as capital, how it is calculated, and how much is enough. This artificial mechanism has resulted in a decline of both the level and quality of capital among the world’s largest banks. As the regulators have supplanted the market in setting bank capital standards, they increasingly rely on ever more arcane and complicated methods to determine how much capital a bank should hold. They assign risk weighs to the different asset categories held by banks. In contrast, the absence of the largest banks having sufficient equity capital as they entered the Great Recession, required governments to infuse public funds into many of them. It will be at significant public cost if that lesson must be relearned should bank capital weaken."