Wednesday, July 16, 2008

Simpler standards for investment banks

The Federal Reserve and Treasury Department have proposed new regulations for investment banks as well temporary access to emergency lending from the Fed.

However, Allan Meltzer observes,
Only in the weird world of Washington are mistakes rewarded with major new responsibilities. After mismanaging both housing loans and the dot-com mess, the Federal Reserve may now become responsible for supervising investment banks.
He offers a simpler, alternative prescription:
Investment banks don't need the Fed to regulate them. Some clear rules on capitalization would suffice.

3 comments:

doug johnson said...

Bankers tell me this is the regulations they killed a few years ago.

Dave Ribar said...

Doug:

Which regulations? The new ones being proposed by the Fed and Treasury or the capitalization requirements?

BTW, as Meltzer points out, we shouldn't impose more stringent capitalization requirements until after the current crisis has passed.

Doug Johnson said...

Not sure, I am not a banker. I know the bankers think congress is nuts.. We know Cris Dodd is, got 75,000 to pass bill to help Nation wide.