The Fed should have understood that you can't raise rates so fast - Zingales... because when you do,

Apr 06, 2023
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The Fed should have understood that you can't raise rates so fast - Zingales

... because when you do, you impose losses in the bond market, and who's going to bear those losses? Insurance companies? Then you have to bail them out. Banks? Then you have to bail them out. Unless the losses are among us, the investors, then something happens.

'Complacent.'

Admati: 'Where does ability to absorb losses come from if not from investors like every other company?' If SVB had more ability to absorb losses it would have absorbed those losses.

'You can build your equity by retaining your earnings, and you'll have plenty of money to lend. Just make a worthy investment.'

'A heavily indebted borrower, especially if the creditors are not putting putting tough conditions on you, like depositors don't, you love always borrowing more and more.'

Regulators Created Wasteful Rules for Banks: Admati - YouTube

Funding with equity instead of debt, and also instead of all these fancy debt securities that magically will absorb losses.'

The reserves is a completely different language and it's just confusing you to call it 'capital' and not to call it just 'equity funding'.
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<div>The Fed should have understood that you can't raise rates so fast - Zingales</div><div><br></div><div>... because when you do, you impose losses in the bond market, and who's going to bear those losses? Insurance companies? Then you have to bail them out. Banks? Then you have to bail them out. Unless the losses are among us, the investors, then something happens. <br></div><div><br></div><div>'Complacent.'<br></div><div> </div><div>Admati: 'Where does ability to absorb losses come from if not from investors like every other company?' If SVB had more ability to absorb losses it would have absorbed those losses. <br></div><div><br></div><div>'You can build your equity by retaining your earnings, and you'll have plenty of money to lend. Just make a worthy investment.' <br></div><div><br></div><div>'A heavily indebted borrower, especially if the creditors are not putting putting tough conditions on you, like depositors don't, you love always borrowing more and more.'</div><div><br></div> <div><a target="_blank" href="https://www.youtube.com/watch?v=j2D9bH7e3zw">Regulators Created Wasteful Rules for Banks: Admati - YouTube</a> <br></div><div><br></div><div>Funding with equity instead of debt, and also instead of all these fancy debt securities that magically will absorb losses.' <br></div><div><br></div><div>The reserves is a completely different language and it's just confusing you to call it 'capital' and not to call it just 'equity funding'. <br></div><div><br></div><div><br></div>
The Fed should have understood that you can't raise rates so fast - Zingales

... because when you do, you impose losses in the bond market, and who's going to bear those losses? Insurance companies? Then you have to bail them out. Banks? Then you have to bail them out. Unless the losses are among us, the investors, then something happens.

'Complacent.'

Admati: 'Where does ability to absorb losses come from if not from investors like every other company?' If SVB had more ability to absorb losses it would have absorbed those losses.

'You can build your equity by retaining your earnings, and you'll have plenty of money to lend. Just make a worthy investment.'

'A heavily indebted borrower, especially if the creditors are not putting putting tough conditions on you, like depositors don't, you love always borrowing more and more.'

Regulators Created Wasteful Rules for Banks: Admati - YouTube

Funding with equity instead of debt, and also instead of all these fancy debt securities that magically will absorb losses.'

The reserves is a completely different language and it's just confusing you to call it 'capital' and not to call it just 'equity funding'.

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