Should Increased Regulation of Bank Risk-Taking Come from Regulators or from the Market?

FRB Richmond Economic Quarterly, Vol. 95, No. 2, Spring 2009, pp. 161-200

40 Pages Posted: 13 Dec 2012

See all articles by Robert L. Hetzel

Robert L. Hetzel

Federal Reserve Banks - Federal Reserve Bank of Richmond

Date Written: 2009

Abstract

The heavy losses in bank asset portfolios do not reflect an inherent failure of markets to monitor risk adequately but rather the perverse incentives of the financial safety net to excessive risk-taking. The unsustainable rise in house prices and their subsequent sharp decline derived from the combination of a public policy to expand home ownership to unrealistic levels and from a financial safety net that encouraged excessive risk-taking by banks.

Suggested Citation

Hetzel, Robert L., Should Increased Regulation of Bank Risk-Taking Come from Regulators or from the Market? (2009). FRB Richmond Economic Quarterly, Vol. 95, No. 2, Spring 2009, pp. 161-200, Available at SSRN: https://ssrn.com/abstract=2188487

Robert L. Hetzel (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Richmond ( email )

P.O. Box 27622
Richmond, VA 23261
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
28
Abstract Views
628
PlumX Metrics