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Implicit Unlimited Deposit Insurance Revealed
- The US effectively had implicit unlimited deposit insurance long before it became explicit.
- Making guarantees explicit forces better regulation and reveals moral hazards in banking.
Rethinking Bonds in Banking
- Banks holding long-term bonds as liquid is risky and flawed.
- Changing these bond treatments to remove interest rate risk transforms banking regulation.
Focus Regulation on Assets, Not Liability
- Unlimited deposit insurance should eliminate complex distinctions among government-guaranteed assets.
- Focus regulation on asset quality and collateral, not deposit liability caps.