This paper reviews the cost-benefit analysis, or “regulatory impact analysis” (RIA), in US bank regulators’ risk-based capital (RBC) rule proposals. We review the principles of cost-benefit analysis and its application by US bank regulators. We provide a brief background on RBC rules and...

This paper reviews the cost-benefit analysis, or 'regulatory impact analysis' (RIA), in US bank regulators' risk-based capital (RBC) rule proposals. We review the principles of cost-benefit analysis and its application by US bank regulators. We provide a brief background on RBC rules and review...

US banks are thought to have become increasingly fragile and exposed during the lead-up to the recent financial crisis. However, commercial bank leverage actually decreased during this period. To resolve this discrepancy, we explore another dimension of bank balance sheets: the effective...

The Federal Reserve regulates U.S. commercial banks using a system of risk-based capital (RBC) regulations based on the Basel Accords. Unfortunately, the Fed's misrating of several assets such as mortgage-backed securities encouraged the build-up of these assets in the banking system and was a...

This issue brief discusses the potential causes of the post-crisis decline in bank lending. First, it compares bank lending to several measures of economic activity. Second, it discusses two other factors that affect lending: regulation and changes in the Fed's monetary policy. The evidence...

The Dodd-Frank Act of 2010 roughly doubled the number of regulations applied to U.S. banks. In a recent paper, my coauthor Scott Burns and I estimate the effects of the Dodd-Frank Act on U.S. bank expenses. This brief summarizes three key findings of that study: (1) Banks' total noninterest...

This paper evaluates the effectiveness of risk-based capital (RBC) regulation and challenges some evidence from the well-known study by Haldane and Madouros (2012). We reconsider the evidence on the relationship between RBC ratios and failures of US banks from Haldane and Madouros (2012) and...

This paper analyzes the relationship between bank lending and the Federal Reserve's policy of paying interest on excess reserves (IOER). We argue that the Fed's IOER policy deviates from the standard interest-rate floor framework in ways that influence banks' incentives to hold loans and...

How has the impact of wars affected our historical understanding of U.S. economic performance? While most economists believe the Federal Reserve has improved performance, the existing literature fails to account for exogenous shocks such as periods of war. This paper compares U.S. economic...