« Scattered thoughts | Main | Manipulation of Prediction Markets »
USA regulates USA -- whoops!
Government regulations -- numerous ones I might add -- are standing in the way of the Treasury plan to recapitalize U.S. banks:
The problem is this: Under existing rules, banks cannot count the Treasury Department's investment as part of their core capital, the foundation of money that supports a bank's operations. The very goal of the plan was to buttress those foundations, which have been eroded by recent losses, undermining the stability of the banks.
The Fed has changed its rule to accommodate Treasury policy and so has the OCC. But will the Office of Thrift Supervision, the Federal Deposit Insurance Corp. and state banking regulators follow suit? Sooner or later, yes. Get this: "All have their own capital standards and it remained unclear early this afternoon how many of those standards might need to be adjusted." I vote on the state authorities to come in last.
Posted by Tyler Cowen on October 18, 2008 at 06:27 AM in Law | Permalink
Comments
The new rule that will make it legal will be titled the "Marx to Market" law.
Posted by: Andrew at Oct 18, 2008 9:33:33 AM
Let It Count. Why Not?
From the Washington Post:
http://www.washingtonpost.com/wp-dyn/content/article/2008/10/17/AR2008101701505.html?hpid=topnews
"Banking regulators have traditionally been concerned that the increase in interest payments made such preferred shares a less stable source of capital, because it increases the chances that a bank will decide to repay the shareholder's investment and eliminate the shares.
In setting aside its concerns, the Fed noted that the Treasury's plan was designed "to help achieve a fundamental public policy objective in the United States."
I guess this means that the taxpayers don't need to make money.
Posted by: Don the libertarian Democrat at Oct 18, 2008 11:30:00 AM
Why inject money at all? Why not just declare the assets worth more?
Posted by: Yancey Ward at Oct 18, 2008 2:17:51 PM
Schwartz, co-author with Friedman of A Monetary History of the United States, and a moneterist is sounding very Austrian here:
How did we get into this mess in the first place? As in the 1920s, the current "disturbance" started with a "mania." But manias always have a cause. "If you investigate individually the manias that the market has so dubbed over the years, in every case, it was expansive monetary policy that generated the boom in an asset.
"The particular asset varied from one boom to another. But the basic underlying propagator was too-easy monetary policy and too-low interest rates that induced ordinary people to say, well, it's so cheap to acquire whatever is the object of desire in an asset boom, and go ahead and acquire that object. And then of course if monetary policy tightens, the boom collapses."
Sounds like she's quoting the Austrian Business Cycle Theory!
Posted by: Vic at Oct 18, 2008 5:34:08 PM
Same thing happened with the GSEs, cumulative preferred is statutorially excluded from their definition of core capital, but that's what treasury issued to the enterprises.
Posted by: nelsonal at Oct 18, 2008 8:55:44 PM
Why inject money at all? Why not just declare the assets worth more?
Hmm... how can I credibly declare that these assets are worth more without buying them?
Posted by: duckhawk at Oct 19, 2008 9:52:57 PM
Welcome to our company which sells all kinds of maple mesos.
Posted by: maple mesos at Jan 1, 2009 11:36:28 PM
Mabinogi Gold
Mabinogi online gold
Mabinogi money
cheap Mabinogi gold
buy Mabinogi gold
Posted by: aion kina at Mar 18, 2009 2:47:05 AM
there are a lot of secrate in government
Posted by: kate at May 14, 2009 11:05:41 PM
It is enlightening!
Posted by: bater at May 14, 2009 11:06:20 PM
