Detaching regulatory capital requirements from Mark to Market
Massive government interaction is definitely the most inefficient way to run a market. Instead of just detaching capital requirements from mark to market and allowing the banks to use mark to model for regulatory reasons and maintain mark to market for reporting, as mentioned by Karen Finerman on CNBC’s Fast Money mentioned as I had been wondering myself even before I heard from Karen the seemingly obvious alternative to the capital requirements problem.If the reason the assets need to be bought by the PIPP program is because the banks need more capital in order to lend, then change the system for capital requirements.
Now we will be forcing banks to sell assets they dont want to sell and we will be creating more inefficiency. The markets may seem like they liked this announcesent but overall the government interaction has killed the natural spirit of the market. Look at the reaction last week after the FED announcement the market continued to decline, especially because of the precipitous decline in the dollar that followed.
Related posts:
