Abstract

We examine the pervasive view that 'equity is expensive,' which leads to claims that high capital requirements are costly and would affect credit markets adversely. We find that arguments made to support this view are either fallacious, irrelevant, or very weak. (Click for full abstract)

• "Healthy Banking System is the Goal, not Profitable Banks," Text of Letter signed by 20 academics, Published in Financial Times, November 9, 2010.

Related Writings and Presentations by the Authors

Here are some materials related to the paper 'Fallacies, Irrelevant Facts, and Myths in the Discussion of Capital Regulation: Why Bank Equity is Not Expensive.'

Commentary and Letters 

• The Tuesday Podcast: Can We Create Banks We Love?, NPR Planet Money, February 7, 2012
• "Easing capital rules would lead banks away from vital lending," letter to the editor by Anat Admati, Financial Times, August 23, 2011
• "Greenspan's reasoning on 'excessive' equity is misleading," text of Letter to the Editor signed by 20 academics, Financial Times, August 2, 2011
• "Beware of Banks' Flawed Focus on Return on Equity," op ed by Anat Admati, New York Times Dealbook, July 25, 2011
• An Open Letter to JPMorgan Chase Board of Directors, by Anat Admati, in Thomson Reuters Risk Magazine and Huffington Post, June 14, 2011.
• 'Global 'Level-Playing-Field' Arguments are Invalid,' and 'Battle to Regulate Banks has just Begun,' by Anat Admati and Martin Hellwig, op ed in 'Martin Wolf's Economists' Forum' in June 7 2011 FT.com, and June 3 2011 Financial Times, respectively
• 'Rethinking How Banks Create Value,' by Anat Admati, in June 2011 FS Focus Magazine, published by ICAEW (Institute of Chartered Accountants in England and Wales)
• 'Force Banks to Put America's Needs First,'
  By Anat Admati
  Op-Ed Piece, Financial Times, Jan. 20, 2011
• more commentary and letters by the authors

Presentations and Lectures

• "Debt Financing in the Domestic Financial Sector," testimony by Paul Pfleiderer to the U.S. Senate Committee on Banking, Housing and Urban Affairs, Financial Institutions and Consumer Protection Subcommittee; August 3 2011
• "The False Tradeoff Between Economic Growth and Bank Capital,"slide presentation by Anat Admati, Washington DC briefing, June 22 2011
• Fallacies, Irrelevant Facts, and Myths in the Discussion of Capital Regulation:Why Bank Equity is Not Expensive, by Anat R. Admati, Peter M. DeMarzo, Martin F. Hellwig, and Paul Pfleiderer, Stanford Finance Forum: Bank Capital and Liquidity, June 3, 2011
• more presentations and lectures by the authors

Policy Papers

• "Comments on the Implementation of the Volcker Rule," by Anat Admati and Paul Pfleiderer, submitted to federal regulators February 13, 2012
• "Good Banking Regulation Needs Clear Focus, Sensible Tools, and Political Will," by Anat Admati and Martin Hellwig, December 2011
• "Comments to the UK Independent Commission on Banking," by Anat Admati and Martin Hellwig, July 4, 2011
• 'Comments on Proposal to Ensure the Loss Absorbency of Regulatory Capital at the Point of Non-viability', Text prepared by Anat Admati for the Basel Committee on Bank Supervision, October, 2010.
• more policy papers by the authors

Academic Writing 

• "Liability Holding Companies," by Anat Admati, Peter Conti-Brown, Paul Pfleiderer, UCLA Law Review, forthcoming, 2012
• Capital Regulation after the Crisis: Business as Usual?" by Martin Hellwig, Max Planck Institute for Research on Collective Goods, Bonn, Germany, July 2010
• more academic writing by the authors