Somewhere in the United States right now, an entrepreneur is having trouble getting a small-business loan for expansion. The reason? The bank is committed to keeping a large portion of its money in government debt instead.
After the financial crisis, the government, in the form of the Federal Reserve, the Comptroller of the Currency and the Federal Deposit Insurance Corporation, imposed liquidity requirements that force American banks with assets over $50 billion to hold huge amounts of government debt as liquid assets.
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