FT.com / Comment / Opinion - Let central banks direct the supply of credit

FT.com / Comment / Opinion - Let central banks direct the supply of credit

Interesting policy suggestion that I am not sure will be so easy to implement. The question is how do you set capital ratio levels to counteract foreign capitals inflows? What formula do you use?

if too much capital is set aside, it will go to buy government bonds, thereby pressuring down interest rates against central banks goals,...

The real pb in my view was the inability to control long term rates.

Again, a BICs framework on interest rate is to me the most efficient mechanism of controlling long term rates, thereby controlling mortgage demand/supply

Senators Debate Fed's Role in Overseeing Systemic Risk - WSJ.com

Senators Debate Fed's Role in Overseeing Systemic Risk - WSJ.com
Reasonable debate to have. In my book BICs 4 Derivatives Volume I : Theory
(Chapter VIII, pp 192-195), I argued for a central counterparty organization as counterparty of reference on all trades which guarantees the payment of contractual agreements on both sides of a transaction.

The systemic risk overseeing entity should act as central counterparty of reference on all trades whose default may pose a systemic risk or act as a regulator and guarantor of last resort to private entities (exchanges, clearing houses,...) who play such a role.

As a guarantor of last resort, this entity may be best within FDIC; As guarantor of credibility through the power to print money, this entity may be best within the Central Bank authority. What is most important in my view is that its function be articulated as proposed above.