Iii why were japanese banks taking a position in

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iii. Why were Japanese banks taking a position in interest-rate swaps? What were the risks? What was the role of the capital standards? iv. Do you think the capital standards have made banks safer? v. How did they affect the business of banking? iv. What would you suggest as an alternative to capital standards? D. Read “More questions than answers: The Volcker rule” (19.7) and answer the following: i. What is the Volcker Rule? What is its purpose? How is it reminiscent of Glass- Steagall? How does it differ? ii. What are its possible unintended and undesirable consequences? iii. Which kind of security is exempt and why? E. Read “Big Insurers Need to be Watched” (19.1) and “Roadkill in the Fed’s race to regulate shadow banking”(19.2) and answer the following: Note: During the Crisis, the government bailed out, for the first time, some nonbank financial institutions, arguing that their failure would have threatened the stability of the financial system. This became official policy under Dodd-Frank, which gave regulators the authority to designate financial institutions (both bank and non- bank) as ‘systemically important’ (SIFIs); institutions so designated would then be subject to “stringent regulation” by the Fed. i. Is MetLife a potential danger to the financial system in the same way as, say, a large bank? Is GEC? ii. Was the Fed already empowered to help nonbanks in a crisis? How? iii. Is MetLife undercapitalized at an equity ratio of 5.6%? Is GEC ‘too risky’? Who is the best judge? v. What, again, is the reason for prudential (risk) regulation of banks? Does this apply to nonbanks? So why the new regulations?
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Externalities occur whenever individuals do not bear all the costs of their actions (from bank and depositor POV) 4 categories of banks: o banks with a national charter: members of FDIC- federal reserve system o state-chartered banks that are members of the fed o state-chartered banks that are not members of the fed but are insured by the FDIC o state-chartered banks not insured by the FDIC
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  • Fall '19
  • Federal Reserve System, FDIC

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