Liquidity-Versus-Capital Debate Divides Stanford: Simon Johnson
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Feb. 20 (Bloomberg) -- Top researchers at the StanfordUniversity Graduate School of Business are taking diametricallyopposing views on the Volcker rule, one of the most importantissues in financial reform. The sharp distinctions can be seenin their public comments to U.S. bank regulators writing therule, the part of the Dodd-Frank law that restricts proprietarytrading by very large banks.
Far from being of purely academic interest, the debatebetween these research teams cuts to the heart of the realeconomic and political issues at stake. (For more background onthe proposed Volcker rule, I strongly recommend this commentletter by Better Markets, a nonprofit group that advocatesstricter oversight.)