Forget the Fed. tapering off QE. The big unresolved issue for the Fed. concerns bank leverage ratios. The extent to which financial institutions should be allowed to borrow relative to their total balance sheets is in front of the Fed. What is at issue is the extent to which banking regulators should rely on a simple leverage ratio -- that is, the size of banking assets relative to loss-absorbing equity capital, with due consideration of so-called risk-weighted assets. Or, to put it more bluntly, should banks be required to hold assets in proportion to the risk of their loans. Banks, of course, say this is over regulation.
Posted on: Wed, 04 Sep 2013 11:58:52 +0000
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