On the Adequacy of Bank Capital Regulation.

The article explores how bank regulators in the United States can pursue optimal policies to regulate bank capital under the existing banking laws. The authors use existing market models, the linear effect of leverage on beta, and approximation theories to create a "bench mark" model to be used by regulators to determine strategies about specific bank situations. The article also presents a discussion of the funding of U.S. bank regulatory agencies such as the Federal Deposit Insurance Corporation (FDIC), policies regarding both assets and capital, and matters of scale regarding the possibility of bank failures.