MS&E 147 Lecture Notes - Lecture 13: Interest Rate Risk, Tier 1 Capital, Sarah Bloom Raskin
28 Feb 2017
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Final exam: only textbooks and two pages of notes allowed, no electronics. Understanding how regulators operate is essential for understanding financial policy. Example: 1818b, gives a lot of authority, but not implemented well. Gives federal banking agencies authority to take significant action against bank that in their opinion is engaging or has engaged in unsafe or unsound practice. Occ and fed failed to act, reckless mortgage practices pre crisis. Vague language of laws, industry incentives and resources to resist, lack of oversight by. Congress (friends in congress from banks), funding of regulatory agency by industry, revolving doors through system (job moves) Regulations and enforcement depend on outside entities through reliance on accounting or delegation to independent third parties. Major expansion of activities by regulators: derivatives. Glass steagall act separated deposit taking from securities trading and dealing, insurance business, repealed in 1999, wanted to protect consumers and people depositing.
