WSJ headlines and questions for January 12 2011

WSJ headlines and questions for January 12 2011 - with the...

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WSJ headlines and questions January 12, 2011. WSJ Headline January 10. Economists Urge More Bank Reform Background: Last year, the U.S. government passed the Dodd-Frank financial reform bill and the BIS in Basel passed Basel III, which would raise capital standards. Economists meeting at the ASSA meetings in Denver say that the reforms are not enough. Reforms are not nearly enough to avert another disaster, say the academic economists. They argue that the new capital standards, which will require that banks hold common equity of at least 7% of their risk-adjusted assets, and will affect internationally active big banks, are not tough enough. They also argue that there is too much uncertainty about how the government will deal
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Unformatted text preview: with the large institutions when there is another crisis. They say that regulators have too much discretion in deciding whether to bail out big banks. They say that large institutions still have incentives to become even larger to increase their probability of being bailed out. Questions: 1. Do you generally agree or disagree that the government has not gone far enough in regulating the banks? 2. How does requiring more bank capital reduce the risk of financial institutions? 3. Should regulators have rules about when they discipline banks and shut them down? 4. Do you believe that regulators will shut down a big bank that has lost all its capital in the future? Under what circumstances?...
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This note was uploaded on 07/02/2011 for the course FINA 465 taught by Professor Berger during the Spring '11 term at South Carolina.

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