My #CatoFinReg tweets during “The Evolution of Banking: The 2020 Cato Summit on Financial Regulation”
Many of these tweet were retweeted and or liked by @CatoEvents and @CatoCMFA, something that I much appreciate.
That said, I do believe the “risk weighted bank capital requirements”, merit a public discussion that is long overdue.
Why does the Emperor wear no clothes?
Why do regulators base their risk weighted bank capital requirements on that what’s perceived as risky is more dangerous to our bank system than what’s perceived as safe?
Should for instance Texas be happy with that banks in Texas have to hold much more capital (equity) when lending to Texan entrepreneurs than when lending to a AAA rated corporation elsewhere or to the Federal government?
Regulators based bank capital requirements mostly on perceived credit risk banks, not on misperceived credit risks, or unexpected dangers, like Covid-19… so now banks stand there with pants down, with no capital to support lending… when most needed
Lower bank capital requirements on loans to the government than on loans to entrepreneurs, de facto implies bureaucrats/politicians know better what to do with credit they’re not personally responsible for, than entrepreneurs.
Do they really?
The risk weighted bank capital requirements improve opportunities of credit of… “those that have the most political support, sovereign credits and home mortgages” Paul Volcker, 2018.
Have not federal regulators exceeded their authority when doing so?
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