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Portions of the Tax Cuts and Jobs Act of 2017 were designed to spur investment--and thus prosperity--in distressed communities by providing incentives to unlock nearly $6 trillion in unrealized capital [...]

The most recent financial crisis made it clear that something finally had to be done to make sure that big banks would never again pose such a systemic threat to [...]

At one time or another almost everyone borrows money, even if just ' a small sum for a short time. It may be for necessities, like buying milk and cereal [...]

This paper studies the financing status of small and medium enterprises (SMEs) in transition economies. Factors causing financing obstacles are indentified and further analyzed to determine their influence over financing patterns. Bank regulatory practices relevant to SMEs' access to bank loans and their influence over loan structures are identified. This study contributes to the existing body of knowledge by exploring the impact of specific bank regulatory practices on credit lending to SMEs in transition economies. Keywords Cross-border banking. Bank mergers and acquisitions. Bank regulation JEL G00. G10, Introduction Small and medium enterprises (SMEs) foster market diversification, promote innovation, and provide many employment opportunities. Yet SMEs are credit insufficient and vulnerable to credit crunches during financial crises. In [...]

Byline: James R. Barth Editor's note: This post is based on Mercatus Center research conducted by the authors. A core purpose of a cost-benefit analysis in the regulatory process is, [...]

A study conducted on the structure, regulation and performance of banks in Europe and Group of Ten countries showed the restrictive nature of banking regulation in the US that makes its banking industry lag behind the services offered by its European and advanced countries counterpart. Banks in Europe and other G-10 nations have been deregulated to the extent that these institutions offer several innovative services not found in US banks. The structure of ownership and businesses engaged in by these banks are some of the key hindrances faced by US banks.

The government is studying proposals to ease restrictions that separate depositary institutions from other types of firms, particularly the legal barriers that exist between banks and commercial firms that were erected by the Bank Holding Act of 1956. The law only serves to place domestic banks at a disadvantage in the international banking market as they cannot pursue the opportunities that are open to their foreign counterparts. Arguments against the easing of regulatory barriers include potential conflicts of interest and undue concentrations of economic and political power, as well as the possibility that the federal subsidy that banks receive might be transferred to an affiliated commercial firm. However, as international competition escalates, US banks will continue lagging behind their foreign counterparts if they were to remain under obsolete regulatory restrictions.

The Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) of 1989 was enacted to provide for the resolution of failed savings and loans and to place limitations on the activities [...]

The savings and loan (S&L) industry of Texas is examined in an attempt to pinpoint the factors that led to the failures encountered by S&Ls during the 1980s. The Texas institutions are selected for the study because they make up more than 50% of the losses incurred during the past decade. Results of the study show that the basic cause of the losses is not deregulation. Instead, the ownership structure and owner-contributed equity capital are found to be the major influences on firm behavior. This supports the view that incentives should be incorporated in the explanation of behavior along with the ability to enter into a broader range of activities. Specifically, there are significant differences between mutual and stock S&Ls, and between weakly and more strongly capitalized institutions. These findings suggest that there is an inverse relationship between risk-taking behavior and the amount of at-risk capital that shareholders have.

IS THE BANKING SYSTEM IN MORE TROUBLE THAN WE THINK? ARE THEY MAKING TOO MANY LOANS, OR TOO FEW? WHAT'S IN STORE BEYOND THE RECESSION? AFTER THE ELECTION, WILL THERE [...]

A recent and potentially profound innovation is the creation of cryptocurrencies and the underlying technology that is essential for their use in various financial transactions. Given the anonymity of a user of a cryptocurrency, such digital currencies may be used for many different types of both lawful and illicit activities. The main purpose of this paper is to examine the extent to which ethical considerations associated with the use of cryptocurrencies affect the valuations attached to such currencies. The examination is based on a text analytic approach that involves measuring the extent to which ethical and unethical words are used in a discussion related to Bitcoin on Twitter to determine if there is a connection between ethics and cryptocurrency valuations. We find the frequency of an unethical discussion about Bitcoin is negatively associated with its price. In contrast, the frequency of an ethical discussion is positively associated with its price.

While there are still signs of trouble ahead for many despository institutions, the most significant change with the financial services industry has been the shrinking share of an expanding pool of assets accounted for by depository institutions. The secular changes accelerated by advances in information technology reflect an increasingly competitive financial marketplace. Depositories will need to reduce inefficiencies in order to remain competitive in the future.

The result of the merger of Wachovia and SouthTrust Corp. is a bank with $159 billion in deposits, which moves it ahead of Bank of America NA for the largest market share in the Southeastern banking market. There are several quires about Alabama's banks being in potential targets but the Wachovia acquisition is the first major transaction to actually occur.

The author discusses how bank regulations in countries around the world are being influenced by interest groups. Topics discussed include the important role of banks in obtaining economic development, the views of private and public interest groups about banking regulation, and the types of regulations that contribute to the development of well-functioning banking systems.

The Clinton administration has taken a step in the right direction by proposing a consolidation plan that will merge four bank regulatory agencies. The proposal calls for the consolidation of the Federal Deposit Insurance Corp, Office of Thrift Supervision, Office of the Comptroller of the Currency and Federal Reserve System into one entity, the Federal Banking Commission. By consolidating the four regulatory agencies, financial institutions will have less of an incentive to 'charter shop' and will have lower regulatory costs., Finally, streamlining federal bank regulation is an idea whose time may have come. The Clinton administration, elected on a platform of change, is proposing a major restructuring of the four [...]

Economists James R. Barth and R. Dan Brumbaugh Jr. have been thinking about ways to prepare the bank system for the next century. One idea, broached for the first time [...]

Well‐functioning financial systems promote economic growth by channeling funds from those who save to those who invest in the productive capacity of economies. What are the main features of a well functioning system? Are well developed capital markets essential to the process? Or are commercial banks and other “private” sources of capital capable of bringing about the same levels of growth and prosperity?

This article examines the impact of fiscal policy on economic activity in the framework of the important model developed by Blinder and Solow which assesses the macroeconomic impact of federal budgetary actions. In addition to raising some questions about Blinder and Solow's conclusions regarding the efficacy of bond-financed fiscal policy, we introduce some logical extensions of their original model to examine the robustness of various income and interest rate multipliers. It is shown that even minor modifications are sufficient to bring about reversals in signs of these key multipliers. In sum, this article not only answers some important questions but also raises equally significant issues regarding the efficacy of fiscal policy

The purpose of this paper is to evaluate the proposed allocation of funds sunder the Better Communities Act of 1973 by assessing the degree to which funds are actually allocated according to specific formulas incorporated in the legislation. Under the Better Communities Act, funds would be allocated to state and local governments on the basis of population, poverty, and overcrowded housing The degree to which these allocation criteria as well as other economic variables explain the proposed allocation of Federal funds is assessed. When the three variables in the formula were used to explain the variation in the distribution of funds among states, the results were poor because only about 33% of the total variance was explained. Although the explanatory power of these three variables was considerably higher when SMSAs were employed as the unit of observation, the empirical findings still indicated that the allocation criteria proposed alone were relatively unimportant. Moreover, our results reveal that the formula explains little of the variation in per capita distribution of funds among either states or SMSAs, even after including other economic variables as allocation criteria. In conclusion, these findings imply that the proposed distribution of funds among both states and large SMSAs fails to follow closely the requirements of the allocation formula set forth in the Better Communities Act. The approach employed here can be applied to evaluate other distributions of Federal revenue-sharing funds according to specified criteria of need.

The biggest financial disaster in modern history struck the savings and loan industry during the 1980s. This paper argues that the unifying cause of this debacle was the way in which the federal deposit insurance system is structured. The fundamental cause was not fraud and deregulation, as is commonly argued. The government not only permitted reportedly insolvent institutions to continue to operate, it permitted many such institutions to grow by offering relatively high rates on their deposits. Unfortunately, the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) of 1989 may not prevent a similar situation from ever recurring. Therefore, one must understand exactly what happened, what the FIRREA does and does not do, and the proposals for reforming the entire structure of the federal deposit insurance system.