This is an interesting article about some of the recent Fed changes and how much better our banks are positioned than 2008. It seems CCAR and the stress tests have worked?
https://www.bloomberg.com/opinion/ar...much-money-now
Quote:
Very loosely speaking, the regulatory response to the 2008 financial crisis was to increase bank capital requirements and push banks to raise as much capital as quickly as possible; the (bank) regulatory response to the 2020 financial crisis has been to reduce bank capital requirements. The latter is much better! I don’t mean that regulators were wrong in 2008; the problem they faced was a crisis of confidence in the banking system, which required them to shore up confidence by increasing capital and implementing stress tests.
But ideally what you want is for banks to have lots of capital in bad times, and then relax those requirements—let them lever up and buy stuff and take deposits and lend and trade Treasuries and generally support the financial system and the economy—when the crisis comes. If you get too lax in the good times, then the crisis becomes a banking crisis and that approach doesn’t work. But if you spend the good times making banks better capitalized and more stress-resistant and generally more credible, then you can spend down some of that credibility in the bad times.
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