Leverage As Holy Writ

Karen Shaw Petrou's memorandum to Federal Financial Analytics clients on leverage as holy writ.

TO: Federal Financial Analytics Clients

FROM: Karen Shaw Petrou

DATE: August 14, 2015

In our new papers on custody-bank deposit capacity and the $50 billion systemic BHC threshold, we focus in part on how relevant rules give a competitive edge to all the non-banks operating beyond the full force of these costly standards. In the American Banker analysis of the regional-BHC paper, a public advocate reasoned that the rules are right and our paper is wrong because there shouldn’t be shadow banks. He went on to say that, if everyone were equally regulated, then the cost of new rules wouldn’t matter, especially given their offsetting benefit of preventing financial...