TY  - BOOK
AU  - Tella,Sebastian Di
ED  - National Bureau of Economic Research.
TI  - Optimal Regulation of Financial Intermediaries
T2  - NBER working paper series
PY  - 2017///
CY  - Cambridge, Mass.
PB  - National Bureau of Economic Research
N1  - July 2017; Hardcopy version available to institutional subscribers
N2  - I characterize the optimal financial regulation policy in an economy where financial intermediaries trade capital assets on behalf of households, but must retain an equity stake to align incentives. Financial regulation is necessary because intermediaries cannot be excluded from privately trading in capital markets. They don't internalize that high asset prices force everyone to bear more risk. The socially optimal allocation can be implemented with a tax on asset holdings. I derive a sufficient statistic for the externality/optimal policy in terms of observable variables, valid for heterogenous intermediaries and asset classes, and arbitrary aggregate shocks. I use market data on leverage and volatility of intermediaries' equity to measure the externality, which co-moves with the business cycle
UR  - https://www.nber.org/papers/w23586
UR  - http://dx.doi.org/10.3386/w23586
ER  -