Hi James, You are many times smarter and better educated on the subject than I, but is there no possible downside to removing treasuries from the denominator? Might banks over allocate to Treasuries, not because it is economically sound, but to improve their capital ratios superficially? Or what if banks load up on treasuries but finance them with short-term repo or deposits? They are following the letter of the SLR rules, but wouldn't this expose them to liquidity and interest rate risks?
Makes me wonder how much Jamie Dimon is truly concerned about treasury market about to break, versus trying to encourage adoption of less stringent SLR
Is there a recursive feedback loop embedded here potentially? Exempt treasuries from SLR, promote more treasury issuance and federal debt, higher debt-to-GDP leverage increases credit risk premium on treasuries, more debt issuance is needed to service higher interest costs on treasuries… 🤔
Another great article, James... Nice work!
Nice tie into Bitcoin. I understood about 90% of your discussion but 100% understood it’s bullish for the coin! Thank you James!
Great article, it could use an accompanying video.
Hi James, You are many times smarter and better educated on the subject than I, but is there no possible downside to removing treasuries from the denominator? Might banks over allocate to Treasuries, not because it is economically sound, but to improve their capital ratios superficially? Or what if banks load up on treasuries but finance them with short-term repo or deposits? They are following the letter of the SLR rules, but wouldn't this expose them to liquidity and interest rate risks?
Makes me wonder how much Jamie Dimon is truly concerned about treasury market about to break, versus trying to encourage adoption of less stringent SLR
Thanks Janes, another pithy explanation.
Is there a recursive feedback loop embedded here potentially? Exempt treasuries from SLR, promote more treasury issuance and federal debt, higher debt-to-GDP leverage increases credit risk premium on treasuries, more debt issuance is needed to service higher interest costs on treasuries… 🤔
This is a timely post and an important one. SLR relief should juice markets, liquidity!