Reforming the Short-Term Funding Markets
Harvard University John M. Olin Center for Law, Economics and Business Discussion Paper No. 713
34 Pages Posted: 18 May 2012 Last revised: 21 May 2012
Date Written: May 18, 2012
Abstract
Traditionally, governments have established licensing requirements for the issuance of important classes of monetary instruments — namely, deposit obligations and bank notes. Their issuance has been a legal privilege. This article proposes a similar legal regime for other short-term IOUs, which present similar problems. The approach would be functional rather than formalistic. The article sketches a prototype of such a regulatory system. In addition, the article offers a critical analysis of current reform initiatives pertaining to the short-term funding markets. It finds reasons to doubt that they will be effective. It proposes an alternative, coordinated regulatory approach that could be implemented under current U.S. law.
Keywords: Money, banking, short-term funding, money markets, shadow banking, Dodd-Frank Act
JEL Classification: E42, K23
Suggested Citation: Suggested Citation
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