The Free Market Center
A great number of regulations exist that dictate the behavior of Federal Reserve member banks. In this presentation I will address three important questions regarding the regulation of bank behavior:
- What limits the growth of bank deposit liabilities? Why can’t banks increase “deposits” indefinitely?
- What limits the amount of notes that any bank can acquire? Why don’t banks make more “loans,” even with strong demand?
- What effect do “bad loans” have on these limits? Who absorbs losses when customers default on their notes?
In the rest of this presentation I will address these three questions.
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