Assembled writings on excessive indebtedness, or leverage, in the financial sector and capital regulation, or the regulation of the funding mix, of banks and other financial firms.
The pieces are aimed at multiple audiences and vary in length and presumed knowledge on the part of readers.
To make these pages useful, we first describe the main writings and relate them to one another, then provide a page with links to additional pieces grouped by topic.
Firms’ inability to commit to future funding choices has profound consequences for capital structure dynamics.
We examine the pervasive view that “equity is expensive,” which leads to claims that high capital requirements are costly for society and would affect credit…
We take issue with claims that the funding mix of banks, which makes them fragile and crisis-prone, is efficient because it reflects special liquidity benefits…
The financial system is meant to facilitate efficient allocation of resources, helping people and businesses fund, invest, save, and manage risks.
Capital regulation is critical to address distortions and externalities from intense conflicts of interest in banking and from the failure of markets to counter incentives…
The debate on banking regulation has been dominated by flawed and misleading claims.
The failure of financial regulation can, and did, cause significant harm to the economy.
Excessive leverage (indebtedness) in banking endangers the public and distorts the economy.