Ultimately, it’s very high leverage,” Tomasz Piskorski, a finance professor at Columbia Business School, tells me.
Even a year after that exact thing happened — Silicon Valley Bank failed after depositor demand eclipsed the value of its assets — regulators haven’t addressed the core leverage issue.
The most obvious answer is one the banking industry hates: Increase the amount of money a bank is required to hold in reserve.
And their go-to argument against such regulations is that they force banks to curtail loans to customers, hurting folks in the real economy.
The upshot: Despite the banking industry’s protest, banks can handle much higher capital requirements (at least, according to Piskorski et al).
Persons:
CNN Business ’, it’s, ” Tomasz Piskorski, there’s, Piskorski, haven’t, Jerome Powell, ” Piskorski
Organizations:
CNN Business, New York CNN, New York Community Bank, Columbia Business School, Valley Bank, Federal Reserve, National Bureau of Economic Research
Locations:
New York, Basel, stow, “