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, the Macro Musings podcast 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.