Sunday, March 10, 2019

Is my banking reform whacky?

No, the idea of flexible corridor between deposits and loans is an old one, and Bernanke started it with IOER. The floor system is a half built, and the Fed knows it. The sub-floor, the reverse swap was a trick to allow GSEs into the Fed, halfway.  Bernanke was walking a regulatory minefield, it is hard to describe the ultimate reform in his case.

Corridor works, but it needs cash in advance borrowers, pre-qualed via congestion fees. And it needs the hardest part, a Senate agreement on a 15 year contract. A jump in the ten year rate might just scare the bejesus out of the senators and the subject becomes more public.

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