o increasing reserve requirements o higher capital ratio does make deposit

O increasing reserve requirements o higher capital

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which is least likely to reduce cost of deposit insurance? o increasing reserve requirements o higher capital ratio does make deposit insurance cheaper default risk = credit risk o legally, default means you are not keeping to some covenants of contract leasing = kind of secured lending o leasing is legally more simple to enforce o best form of secured lending that requires no legal intervention = reciprocal lending, pawn market transparency hurts liquidity o market transparency means market has to publish prices in real time o if market does that, it makes it much easier for other markets to compete o results in fragmentation and less liquidity why does bond mutual fund not face interest rate risk? o mutual fund promises nothing to investors underwriter faces interest rate risk bc he buys whole issue and resells it IO strips have negative duration o ultimately, what is sensitivity to interest rate? rates go up, value goes up reinvestment position o bank is borrowing long term and lending back out short term o floating rate swap now allows them to pay short term o fixed rate = longer term rate free cash flow problem = corporate governance problem
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standby letters of credit do nothing to help make commercial paper appear more creditworthy – can’t even use it if credit is bad, only if there are market problems w liquidity
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