144 – Peter Stella on Debt, Safe Assets, and Central Bank Operations
Macro Musings with David Beckworth
00:00
Dodd-Frank's Enhancement Leverage on Capitalization
Banks are caught on this kind of weird squeeze. They have to hold the banking system, has to hold the reserves at the Fed and they really don't want it. Dodd-Frank has introduced some interesting regulations which basically say, by the way, no matter how you finance your balance sheet, you have to pay FDIC charges now. And if you look at the data, it's actually financed by increase in deposits at the banks. The problem is you've inadvertently, right, because this is the only thing the Fed can doIt that's what is with this instrument.
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