Comments On ‘The Minneapolis Plan to End Too Big to Fail’
9 Pages Posted: 1 Feb 2017
Date Written: January 16, 2017
The Minneapolis Plan by the Federal Reserve Bank of Minneapolis is an important policy proposal to increase capital requirements for too-big-to-fail banks and to impose taxes on large shadow banks. The objective of the plan is to end the too-big-to-fail problem and to reduce the need for government bailouts. The authors of the plan use cost benefit analysis framework to derive optimal levels of regulation. In this comment, I discuss the shortfalls of the cost-benefit analysis that serves the foundation for the proposed 23.5% capital requirements. I refer both to the existing research on the topic and provide suggestions for improvements.
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