THE STASH SEPTEMBER 6, 2009
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Treasury's proposal to increase capital requirements on banks around the world won't be loved by the financial sector, but the rest of us should give it strong consideration.
There's little chance more capital would have prevented the crisis, but it would have made the ride down a lot less bumpy. According to a recent analysis by Andrea Beltratti and Rene Stulz, banks with bigger capital cushions, more equity, and more liquid assets -- all part of the "core principles" in the Geithner proposal -- suffered the least both immediately before and during the crisis.
Geithner wants the stricter requirements in place by 2012, but that seems ambitious. Basel II, the current set of recommendations for capital requirements around the world and what the Treasury plan would update, took 10 years to hammer out. And though they were finalized in 2004, the U.S. has yet to adopt them -- let's hope the same thing doesn't happen this time. For more on this, check out a very good analysis by Reuters' Huw Jones.
1 comments
DOTreasury: The procyclicality of the regulatory capital and accounting regimes should be reduced and consideration should be given to introducing countercyclical elements into the regulatory capital regime. george: Ordinarily I break out into hives in the presense of a chart, but this cries out for one. Well, after it is translated into English, of course Here's my own stab at it: "If you properly regulate your capital cycle before each electoral race by accounting for how much money you have already contributed to Congress, your own regime may be coordinated with theirs such that all countercyclical regulation is the only element that matters." Pithy, isn't it? And a suggestion, if you don't mind: At the inflection point conference on 9/14, Christina Romer should make the attempt to encompass all of the separate inflection points into a meaning that is more than the sum of all the inflected parts. That way she can begin the process necessary to obviate all this, uh, fucking bullshit that government, corporate and media intellectuals use to twist obtuse words like this into shiny little nuggets of fool's gold. If nothing else it ought to provide a blessed bit of levity in a gathering that will be nearly spent after ejaculating the arcane jargon of DOTreasury for hours on end. Collegiately, as it were. I'd be there myself but $2,000 a table is bit stiff for the motley crew I hang out with in the sewer. ; o ) gw
- iambiguous
September 6, 2009 at 3:38pm