Mobile Collateral versus Immobile Collateral / Gary Gorton, Tyler Muir.

Format:

Book

Author/Creator:

Gorton, Gary.

Contributor:

National Bureau of Economic Research.

Muir, Tyler.

Series:

Working Paper Series (National Bureau of Economic Research) no. w22619.

NBER working paper series no. w22619

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2016.

Summary:

In the face of the Lucas Critique, economic history can be used to evaluate policy. We use the experience of the U.S. National Banking Era to evaluate the most important bank regulation to emerge from the financial crisis, the Bank for International Settlement's liquidity coverage ratio (LCR) which requires that (net) short-term (uninsured) bank debt (e.g. repo) be backed one-for-one with U.S. Treasuries (or other high quality bonds). The rule is narrow banking. The experience of the U.S. National Banking Era, which also required that bank short-term debt be backed by Treasury debt one-for-one, suggests that the LCR is unlikely to reduce financial fragility and may increase it.

Notes:

Print version record

September 2016.