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MOSLER'S LAW: There is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot deal with it.

Bank Regulation and LIBOR

Posted by WARREN MOSLER on April 27th, 2010

Too big to fail should not mean restricted liquidity.

Hopefully they don’t use the liability side of banking for market discipline.

But as they don’t even know what a bank is and are in this way over their heads they might!

>   
>   (email exchange)
>   
>   On Tue, Apr 27, 2010 at 8:09 AM, Jason wrote:
>   
>   Possibly if the legislation succeeds in removing risk for those determining the setting…
>   
>   But one of the primary goals is to remove the lending subsidy provided by the TBTF
>   moniker
>   
>   If they firmly establish banks as no longer too big to fail, their short term credit ratings
>   could fall as far as tier 2 in some cases.
>   
>   Thus the average LIBOR setting may move higher just as their CP rates move higher.
>   
>   Also if they lose their ability to lend at lowest rates some of their businesses fall into
>   jeopardy (bank letters of credit, liquidity facilities for VRDNs etc)
>   

4 Responses to “Bank Regulation and LIBOR”

  1. Tom Hickey Says:

    But as they don’t even know what a bank is and are in this way over their heads they might!

    Good argument for the hands-off approach to regulation on the grounds that government is just too incompetent to do regulation.

    Reply

    zanon Reply:

    but banks are part of Govt Tom Hickey! they are certainly not pure private enterprises.

    this, incidently, is austrian line — govt too incompetant to control money so use exogenous currency. unfortunately, you can still get hyperinflation and depressions, but now have no tools to deal with it!

    Reply

  2. Tom Hickey Says:

    Zanon, I meant this satirically. :)

    I haven’t figured out yet whether both parties are part of the gang that couldn’t shoot straight or the keystone kops.

    Reply

    zanon Reply:

    I see what you men! just pointing out that austrains make same aregument but in all seriousness.

    Reply

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