I'm A Little Surprised by Fed's Capital Decision: Joshua Younger

The transcript discusses the expiration of financial rule changes and their impact on treasury buying. It explores the potential future changes to the Supplementary Leverage Ratio (SLR) and exemptions, focusing on liquidity issues and market dynamics. The discussion also covers systemic risk and the implications of regulatory decisions on banks and the financial system.

What was surprising about the expiration of the rule change?

• It was effective in avoiding problematic outcomes.

• It was not related to market conditions.

• It was expected to be extended indefinitely.

• It was a permanent change.

How do banks generally approach rule changes?

• They speculate on future changes.

• They assume rules are temporary.

• They ignore them completely.

• They make long-term investments based on them.

What is a potential permanent fix for reserve issues?

• Exempting reserves and Treasurys from all rules.

• Reducing the creation of reserves.

• Exempting only reserves from certain rules.

• Increasing interest rates.

What is a major concern regarding QE and market liquidity?

• QE is not related to market liquidity.

• There is too much liquidity in the market.

• There is not enough liquidity in the market.

• QE always reduces market liquidity.

Why might Treasurys not be considered completely risk-free?

• They have liquidity and interest rate risks.

• They have credit risk.

• They are not issued by the government.

• They cannot be used for repo transactions.

What is a potential risk of large institutions holding Treasurys?

• They are immune to liquidity shocks.

• They are always profitable.

• They face no risks at all.

• They can incur significant losses.

What is a concern about making regulatory decisions to facilitate deficit financing?

• It leads to fiscal dominance.

• It always benefits the economy.

• It reduces systemic risk.

• It is unrelated to monetary policy.