Reforming the Short-Term Funding Markets
Vanderbilt University - Law School
May 18, 2012
Harvard University John M. Olin Center for Law, Economics and Business Discussion Paper No. 713
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.
Number of Pages in PDF File: 34
Keywords: Money, banking, short-term funding, money markets, shadow banking, Dodd-Frank Act
JEL Classification: E42, K23
Date posted: May 18, 2012 ; Last revised: May 21, 2012
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