Anat Admati on the US Banking System and the Basel III Endgame
Macro Musings with David Beckworth
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Balancing Equity and Insolvency in Banking
The chapter explores the crucial balance between equity and insolvency in the banking sector, emphasizing the challenges banks face in hiding underlying weaknesses. It discusses the importance of maintaining a sufficient equity cushion to absorb losses and avoid insolvency triggers, drawing parallels to personal experiences during a financial crisis. The conversation also delves into the debate surrounding 100% equity funded banking and its potential drawbacks on the money supply and risk mitigation.
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