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Best of the Blogs, Banks: Weaker Regulation Not the Answer to Shortfall in Lending


Plus, Standard Chartered's shares rebound after it settles with New York's bank regulator, Ben Lawsky.

This column highlights the most interesting and useful business and financial commentary on banking from around the Web.

Financial Times Alphaville
Link: It's the Capital Requirements, Stupid
"Banks are lending neither to each other, nor to the real economy, in the way they used to. In Europe in particular, loan growth remains subdued. In the UK, there's a lot of hope riding on the Funding for Lending Scheme to alleviate the situation.

"Hence any loosening of liquidity coverage requirements won't make a difference, i.e., because it isn't what's holding banks back. But if banks aren't performing their intermediary function, what good are they exactly?"

Zero Hedge
Link: Presenting the Shocking Source of US Treasury Demand in the Past Year
"When one thinks US Treasuries, and demand thereof, two entities pop into mind: the Federal Reserve, which over the past three years has been the biggest institutional buyer of US paper, and China, which is the largest foreign holder of US TSYs. Yet over the past year something curious happened: when it comes to setting marginal demand for US Treasuries, it was neither the Fed, whose sterilized Operation Twist has kept its holdings of US Tsys relatively flat, nor China, which has actually been a major seller of US paper, that has been the dominant source of marginal demand for Uncle Sam's never to be repaid obligations. Japan."

New York Times Dealbook
Link: Standard Chartered's Shares Rally on Settlement
"Investors in Standard Chartered (SCBFF) breathed a collective sigh of relief on Wednesday.

"The positive reaction came after the British bank agreed to a $340 million fine related to charges that it had laundered hundreds of billions of dollars in money with Iran and lied to regulators.

"Shares in Standard Chartered rose around 5%, to £14.26, or $22.37, in afternoon trading in London on Wednesday, though the stock is still down 9% from when the money laundering charges were announced this month. Its shares had dropped as much as 25% - the sharpest one-day decline in more than two decades - a day after the charges were made public on Aug. 6."

Wall Street Journal MarketBeat
Link: Goldman Sachs: No QE3 at September Meeting
"Goldman's (GS) Jan Hatzius said some recent upbeat economic data – specifically July's stronger retail sales numbers – are enough to hold off a third round of quantitative easing from the Federal Reserve. July retail sales, released yesterday, showed an unexpected 0.8% gain, breaking a three-month losing streak.

"In addition to yesterday's retail-sales report, which rose for the first time in four months, investors have cheered better-than-expected jobless claims data and the latest monthly jobs report, which showed job growth in July expanded at the fastest rate since February. That has sparked questions of whether the economy is truly bad enough to warrant more Fed stimulus."

Marginal Revolution
Link: Will a More Expansionary Monetary Policy Give Rise to a Bubble?
"If a more expansionary monetary policy helps an economy recover, yes it may well raise the risk of a later bubble. We should then be cautious, but that is no reason to turn down the prospect of a recovery. Anything leading to recovery could have a similar risk.

"Real factors drove the [yield curve] flattening, and if monetary expansion brought a bit of recovery it likely would unflatten that curve a bit. That could well lower the risk of a bubble."
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