eighteen53 Blog
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    Providing a more complete picture of credit supply from banks

    Posted 07/26/2017 by Bill Nelson

    In a recent speech, Nellie Liang, senior fellow at the Brookings Institution, reported evidence that she asserts demonstrates that high capital requirements and draconian stress tests are not constraining the provision of credit by banks in the United States.  Ms. Liang overlooked some relevant data on this point that we provide below.

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  • The Clearing House

    The Leverage Ratio: Neither Simple nor Sensible

    Posted 06/26/2017 by Greg Baer and Jeremy Newell

    Renewed interest in the long-running debate over the value and appropriate role of the leverage ratio in bank capital regulation make this an opportune time to revisit key problems with the leverage ratio and flaws in the argument of those who support it. 

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    Unlocking the Liquidity Coverage Ratio

    Posted 06/07/2017 by Bill Nelson

    The penalty and stigma associated with violating the Liquidity Coverage Ratio (LCR) creates a disincentive for banks to use High Quality Liquid Assets (HQLA) in times of stress and potentially causes banks to unnecessarily hoard liquidity.

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    Updated TCH Bank Conditions Index

    Posted 06/02/2017 by TCH Research

    The Clearing House Bank Conditions Index (TCHBCI) shows the first quarter of 2017 had the highest level of resiliency since the start of the index in the first quarter of 1996 (see Exhibit 1).  The aggregate index goes from 0 to 100 with 100 being the most resilient, and since it is at its sample peak, it is at 100. 

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    Bank regulations as a tax on lending

    Posted 05/22/2017 by Bill Nelson

    Some bank regulators have concluded that when they require banks to hold more liquidity or capital against a specific type of lending, the banks will do more of it. In this blog post, we explain why that thinking is mistaken and how excessive capital and liquidity regulations lead to banks lending less. 

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    CCAR Scenarios are Countercyclical, but Fed Staff's Projections show them to be Farfetched

    Posted 05/17/2017 by Bill Nelson and Myya McGregory

    Under the Federal Reserve’s published standard, the severely adverse scenario used in its annual CCAR stress tests should be constructed to “generate scenarios that…do not induce greater procyclicality in the financial system and macroeconomy” and to match “…severe post-war U.S. recessions….” We conclude that, when evaluated using the assessment of the outlook that the Fed staff provides the Federal Open Market Committee (FOMC), the supervisory stress scenarios are countercyclical but extraordinary implausible.

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  • The Clearing House
  • The Clearing House

    Reinstating Glass-Steagall is Unnecessary and Doesn't Make Sense

    Posted 04/26/2017 by Jeremy Newell

    Notwithstanding the successful global effort to strengthen the resiliency of the banking and financial system that was initiated after the 2008 financial crisis, a number of policymakers have proposed plans to “reinstate” the Glass-Steagall Act, which, until 1999, had prohibited commercial banks from affiliating with any company that engaged in securities underwriting or dealing.  The following identifies several key shortcomings of such proposals.

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