September 26, 2016

Macro Musings 25: Morgan Ricks on The Money Problem, Financial Regulation, and Shadow Banking

Hosted by David Beckworth of the Mercatus Center, Macro Musings is a new podcast which pulls back the curtain on the important macroeconomic issues of the past, present, and future.

Morgan Ricks is a law professor at Vanderbilt University and an expert on financial regulation. From 2009-2010, he was a senior policy adviser at the U.S. Treasury Department where he focused on financial stability initiatives. Morgan joins the show to discuss his new book, “The Money Problem: Rethinking Financial Regulation,” which argues that shadow banking institutions create large sums of private sector money through issuing short-term debt. This rapid expansion creates instability to the financial system and to the broader economy. To solve this problem, Morgan proposes that only properly chartered, FDIC-insured banks be allowed to issue short-term liabilities. Although there may be more bureaucracy in insuring the financial system under this proposal, Morgan argues there would be less need for higher capital requirements and other regulations.