11. Financial Innovation, Regulation, and Reform
- Author:
- Charles W. Calomiris
- Publication Date:
- 01-2009
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Financial innovations often respond to regulation by sidestepping regulatory restrictions that would otherwise limit activities in which people wish to engage. Securitization of loans (e.g., credit card receivables, or subprime residential mortgages) is often portrayed, correctly, as having arisen in part as a means of “arbitraging” regulatory capital requirements by booking assets off the balance sheets of regulated banks. Originators of the loans were able to maintain lower equity capital against those loans than they otherwise would have needed to maintain if the loans had been placed on their balance sheet.
- Topic:
- Democratization, Economics, International Trade and Finance, Markets, and Privatization
- Political Geography:
- United States