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Wednesday, April 11, 2012

ABA Abernathy: Dodd-Frank “Squeezing the Risk Balloon”

ABA EVP Wayne Abernathy wrote to Morning Money regarding a speech by Ben Bernanke at the Federal Reserve Bank of Atlanta’s Financial Markets Conference covered by Morning Money. Abernathy wrote:
I thought that one of the quotes you pulled from Bernanke's speech in Georgia was quite perceptive, because it seemed to me unusually candid on Bernanke's part: 'An inevitable side effect of new regulations is that the system will adapt in ways that push risk-taking from more-regulated to less-regulated areas, increasing the need for careful monitoring and supervision of the system as a whole.' This suggests that a lot of what is going on in Dodd-Frank and other regulations is squeezing the risk balloon, with the risks merely moving more fully to the non-bank sector-where they were already more than apparent before the recession. Why should we think that this is accomplishing very much?
Read Bernanke’s speech.

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