DOCSLIB.ORG

Task Force on Financial Stability JUNE 2021

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Task Force on Financial Stability JUNE 2021 at BROOKINGS Task Force on Financial Stability JUNE 2021 Glenn Hubbard Donald Kohn Laurie Goodman Kathryn Judge Anil Kashyap Ralph Koijen Blythe Masters Sandie O’Connor Kara Stein Contents 3 TASK FORCE MEMBERS 5 CHAPTER 1. Introduction 21 CHAPTER 2. Framework for Assessing Financial Stability Risks 29 Introduction to Non-Bank Finance 34 CHAPTER 3. Liquidity of the U.S. Treasury Market 52 CHAPTER 4. Insurance Companies 64 CHAPTER 5. Open-End Funds 73 CHAPTER 6. Housing 91 CHAPTER 7. Clearinghouses 101 CHAPTER 8. Regulatory Structure and Process 117 CHAPTER 9. Putting Reforms to the Test 128 BIBLIOGRAPHY 134 DISCLOSURES Members of the Task Force on Financial Stability Co-chair: Glenn Hubbard, dean emeritus and Russell L. Carson Professor of Finance and Economics, Columbia Business School, and a professor of economics in Columbia’s Faculty of Arts & Sciences. Hubbard was chair of the White House Council of Economic Advisers in the George W. Bush administration. Co-chair: Donald Kohn, Robert V. Roosa Chair in International Economics and a senior fellow in the Brookings Hutchins Center. Kohn was at the Federal Reserve Board from 1975 to 2010, the last several years as vice chair. He is a member of the FDIC’s Systemic Resolution Advisory Committee and a former member of the Financial Policy Committee of the Bank of England. Laurie Goodman, co-director, Housing Finance Policy Center, Urban Institute. Goodman spent 30 years as a mortgage-backed securities analyst and research department manager on Wall Street before joining Urban Institute in 2013 to found the Center. Kathryn Judge, Harvey J. Goldschmid Professor of Law at Columbia Law School. She currently also serves as an editor of the Journal of Financial Regulation and as a research member of the European Corporate Governance Institute. Anil Kashyap, Stevens Distinguished Service Professor of Economics and Finance at the University of Chicago Booth School of Business. He is a member of the Bank of England’s Financial Policy Committee. Ralph Koijen, AQR Capital Management Distinguished Service Professor of Finance at the University of Chicago’s Booth School of Business. In 2019, he was awarded the Fischer Black Prize by the American Finance Association given biennially to the top finance economics scholar under 40. Blythe Masters, Industry Partner at Motive Partners, the fintech specialized private equity firm, and CEO of Motive Capital Corp. Masters previously held several senior management posts at JPMorgan Chase where she was a member of the Firmwide Executive Committee. Sandie O’Connor, independent, former Chief Regulatory Affairs Officer of JPMorgan Chase and previously held several senior management positions at the firm. She is a member of the FDIC’s TASK FORCE ON FINANCIAL STABILITY 3 Systemic Resolution Advisory Committee and the Financial Research Advisory Committee of the Office of Financial Research. Kara Stein, Distinguished Policy Fellow and Lecturer-in-Law, University of Pennsylvania Carey Law School and Senior Research Fellow and Director of the AI and Capital Markets Initiative at the Center for Innovation at the University of California Hastings College of Law. She was a member of the Securities and Exchange Commission from 2013 to 2019. NOTE: Nellie Liang, who was the Miriam K. Carliner Senior Fellow at the Hutchins Center at Brookings, was an original member of the task force, but resigned when she joined the U.S. Treasury in early 2021. • Staff: David Wessel and Stephanie Cencula • Editor: David Skidmore • Project manager: Haowen Chen • Graphic designer: Roxanne Bradley-Tate The Task Force on Financial Stability was supported by the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution, the Initiative on Global Markets at the University of Chicago’s Booth School of Business, and the Smith-Richardson Foundation. The Task Force thanks Jeffrey Cheng, Manuel Alcala Kovalski, Shannon Meraw, and Tyler Powell. TASK FORCE ON FINANCIAL STABILITY 4 Introduction CHAPTER ONE he Global Financial Crisis of 2007-2009 The onset of the pandemic led to panic in exposed extraordinary fault lines in the financial markets that was arrested only by T stability of the world’s financial system massive and unprecedented interventions and its linkages with the real economy. In the by central banks and governments globally, aftermath of that crisis, the United States, led by the United States. The Task Force on as did other nations, significantly reformed Financial Stability was established before its banking sector. Over the following decade, March 2020, but major lessons from that it built the banking sector’s strength and experience have informed our work. The resilience through more demanding capital banking sector, reflecting the effects of and liquidity requirements as well as rigorous earlier reforms, remained resilient and met stress tests of the largest banks. extraordinary demands for credit created when the interruption of economic activity caused But the disruptions in financial markets in by the pandemic sharply cut business cash March 2020 as the COVID-19 pandemic spread, flows. But, in the nonbank sector, the events which threatened to make an already sharp of March 2020 revealed significant fragility contraction in economic activity even worse, and market dysfunction that required those showed that the work of protecting financial central bank and government interventions. stability—of making sure the financial system We conclude that regulatory gaps and changes can provide credit and other critical services in market structure and behavior—driven by in bad times as well as good—is far from new regulations, new technologies, and new complete. In particular, much remains to market entrants—present continuing risks. This leads us to recommendations to address be done on nonbank finance, especially the the evident weaknesses and enhance the provision of credit through markets. ability of the existing regulatory structure to In addition, it is increasingly evident that dynamically identify and address new risks to interest rates may be at historically low levels financial stability in the ever-evolving financial for an extended period, and these low interest landscape. rates might induce excessive risk taking in markets, contributing to the potential for instability that could adversely affect economic activity and employment. The potential for new The Task Force threats underlines the inherent challenge for regulation: It must be dynamic (requiring an The task force was formed in October 2019 ongoing assessment process, not just periodic by the Hutchins Center on Fiscal & Monetary changes) because of innovation, events, and Policy at the Brookings Institution and the Initiative on Global Markets at the University endogenous responses to prior regulation. of Chicago Booth School of Business.*1 * The idea grew from a paper by Anil Kashyap and Caspar Siegert delivered in June 2019 at a Federal Reserve conference on “monetary policy strategies, tools, and communication practices.” The authors noted the potential for financial stability issues to arise from low-for-long interest rates and the lack of an adequate toolset for authorities to deal with these issues. They suggested forming a group to make recommendations that would bolster the government’s ability to deal with potential problems in the financial system. TASK FORCE ON FINANCIAL STABILITY Chapter 1. Introduction 6 Task force members bring a variety of aware of potential costs and looking for the perspectives and expertise. We also consulted most efficient alternatives to deliver the right many other individuals with knowledge and amount of resilience. experience. The work of the task force has Each section of this report explains been funded exclusively by Brookings, Chicago externalities we have identified—the threats Booth, and the Smith Richardson Foundation. to financial stability—for a particular set of institutions or markets that are the focus of that section. We then propose Guiding Principles recommendations for regulation or, where needed, legislation to address these First, our focus has been on the stability of externalities. the financial system—its ability to deliver Second, we concentrate on nonbank financial essential services, like credit intermediation, intermediation in our effort to identify threats risk mitigation, and payments, even after it to financial stability and recommend ways has been hit by an adverse event. We looked of dealing with them. The Dodd-Frank Act of for externalities or spillovers—circumstances 2010 and the recommendations of the Basel in which private-market decisions under the Committee on Bank Supervision have greatly current regulatory framework could prevent strengthened the resilience of the banking the financial sector from delivering essential system since the financial crisis of 2007-09. services at reasonable prices in bad times We are not arguing that the resulting structure as in good times. These externalities mark of bank regulation and supervision cannot circumstances in which the financial sector be improved. Indeed, we recommend some could make a bad situation worse, with the changes, especially where bank regulation effects spilling over to the economy more intersects with the liquidity of securities broadly, for example by unnecessarily limiting markets. But our view is that regulations to credit to households and businesses. protect financial stability are far less adequate Stability is best achieved through resilience— for nonbank
Load more

Recommended publications
  • Frequently Asked Questions Coins and Notes July 2020
    Frequently Asked Questions Coins and Notes July 2020 A. Currency Issuance 1. Under what authority does the Bangko Sentral ng Pilipinas (BSP) issue currency? The BSP is the sole government institution mandated by law to issue notes and coins for circulation in the Philippines. In Particular, Section 50 of Republic Act (R.A) No. 7653, otherwise known as The New Central Bank Act, as amended by Republic Act No. 11211, stipulates that the BSP shall have the sole power and authority to issue currency within the territory of the Philippines. It also issues legal tender commemorative notes and coins. 2. How does the BSP determine the volume/value of notes and coins to be issued annually? The annual volume/value of currency to be issue is projected based on currency demand that is estimated from a set of economic indicators which generally measure the country’s economic activity. Other variables considered in estimating currency order include: required currency reserves, unfit notes for replacement, and beginning inventory balance. The total amount of banknotes and coins that the BSP may issue should not exceed the total assets of the BSP. 3. How is currency issued to the public? Based on forecast of currency demand, denominational order of banknotes and coins is submitted to the Currency Production Sub-Sector (CPSS) for production of banknotes and coins. The CPSS delivers new BSP banknotes and coins to the Cash Department (CD) and the Regional Operations Sub-Sector (ROSS). In turn, CD services withdrawals of notes and coins of banks in the regions through its 22 Regional Offices/Branches.
    [Show full text]
  • MONEY, MARKETS, and DEMOCRACY
    MONEY, MARKETS, and DEMOCRACY POLITICALLY SKEWED FINANCIAL MARKETS and HOW TO FIX THEM GEORGE BRAGUES Money, Markets, and Democracy George Bragues Money, Markets, and Democracy Politically Skewed Financial Markets and How to Fix Them George Bragues University of Guelph-Humber Toronto , Ontario , Canada ISBN 978-1-137-56939-4 ISBN 978-1-137-56940-0 (eBook) DOI 10.1057/978-1-137-56940-0 Library of Congress Control Number: 2016955852 © The Editor(s) (if applicable) and The Author(s) 2017 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifi cally the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfi lms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specifi c statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the pub- lisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made.
    [Show full text]
  • Regulation, Supervision and Oversight of “Global Stablecoin” Arrangements
    Regulation, Supervision and Oversight of “Global Stablecoin” Arrangements Final Report and High-Level Recommendations 13 October 2020 The Financial Stability Board (FSB) coordinates at the international level the work of national financial authorities and international standard-setting bodies in order to develop and promote the implementation of effective regulatory, supervisory and other financial sector policies. Its mandate is set out in the FSB Charter, which governs the policymaking and related activities of the FSB. These activities, including any decisions reached in their context, shall not be binding or give rise to any legal rights or obligations. Contact the Financial Stability Board Sign up for e-mail alerts: www.fsb.org/emailalert Follow the FSB on Twitter: @FinStbBoard E-mail the FSB at: [email protected] Copyright © 2020 Financial Stability Board. Please refer to the terms and conditions Table of Contents Executive summary ................................................................................................................. 1 Glossary .................................................................................................................................. 5 Introduction .............................................................................................................................. 7 1. Characteristics of global stablecoins ................................................................................ 9 1.1. Stabilisation mechanism .......................................................................................
    [Show full text]
  • The Weight of a Libra: Are Stablecoins a New Challenge for External Statistics Compilers?1
    IFC Conference on external statistics "Bridging measurement challenges and analytical needs of external statistics: evolution or revolution?", co-organised with the Bank of Portugal (BoP) and the European Central Bank (ECB) 17-18 February 2020, Lisbon, Portugal The weight of a Libra: are stablecoins a new challenge for external statistics compilers?1 Alessandro Croce, Marco Langiulli and Giuseppina Marocchi, Bank of Italy 1 This presentation was prepared for the meeting. The views expressed are those of the authors and do not necessarily reflect the views of the BIS, IFC, BoP, ECB or the central banks and other institutions represented at the meeting. 1/1 The weight of a “Libra”: are stablecoins a new challenge for external statistics compilers? Alessandro Croce, Marco Langiulli and Giuseppina Marocchi1 Abstract In June 2019, Facebook released a White paper, providing details about a new digital asset called Libra, to be launched in the first half of 2020. Libra is conceived as a low volatility digital coin (stablecoin), fully backed by a reserve of liquid assets and managed by an independent organization. Other Big-Tech companies could follow suit with similar initiatives, eventually reshaping the financial sector: given their (alleged) capacity to preserve value over time and the reputation of their proponents, these coins could rise as global payment instruments as well as novel reserves of value. Regardless of any technical details and contingent regulatory requirements, the purpose of this paper is to evaluate and highlight the impacts of such instruments on external statistics compilation. After a brief digression on digital assets’ features and classification, the potential effects on a few Balance of Payments’ items are discussed: workers’ remittances, digital trading and financial account.
    [Show full text]
  • Pricing Free Bank Notesଝ
    Journal of Monetary Economics 44 (1999) 33}64 Pricing free bank notesଝ Gary Gorton* Department of Finance, The Wharton School, University of Pennsylvania, Suite 2300, Philadelphia, PA 19104, USA and National Bureau of Economic Research, Cambridge, MA 02138, USA Received 4 February 1991; received in revised form 20 June 1995; accepted 5 February 1999 Abstract During the pre-Civil War period, US banks issued distinct private monies, called bank notes. A bank note is a perpetual, risky, non-interest-bearing, debt claim with the right to redeem on demand at par in specie. This paper investigates the pricing of this private money taking into account the enormous changes in technology during the period, namely, the introduction and rapid di!usion of the railroad. A contingent claims pricing model for bank notes is proposed and tested using monthly bank note prices for all banks in North America together with indices of the durations and costs of trips back to issuing banks constructed from pre-Civil War travelers' guides. Evidence is produced that market participants properly priced the risks inherent in these securities, suggesting that wildcat banking was not common because of market discipline. ( 1999 Elsevier Science B.V. All rights reserved. JEL classixcation: G21 Keywords: Bank notes ଝThe comments and suggestions of the Penn Macro Lunch Group, participants at the NBER Meeting on Credit Market Imperfections and Economic Activity, the NBER Meeting on Macroeco- nomic History, and participants at seminars at Ohio State, Yale, London School of Economics and London Business School were greatly appreciated. The research assistance of Sung-ho Ahn, Chip Bayers, Eileen Brenan, Lalit Das, Molly Dooher, Henry Kahwaty, Arvind Krishnamurthy, Charles Chao Lim, Robin Pal, Gary Stein, and Peter Winkelman was greatly appreciated.
    [Show full text]
  • A Global Overview of Regulatory Requirements in Asia Pacific, Europe, the Uae and the Us
    STABLECOINS: A GLOBAL OVERVIEW OF REGULATORY REQUIREMENTS IN ASIA PACIFIC, EUROPE, THE UAE AND THE US SEPTEMBER 2019 STABLECOINS: A GLOBAL OVERVIEW OF REGULATORY REQUIREMENTS IN ASIA PACIFIC, EUROPE, THE UAE AND THE US Facebook’s proposed stablecoin, Libra, is dominating the headlines. However, growing interest means increased regulatory and political scrutiny around the globe. As digital assets transcend national borders, what does this mean for those interested in issuing or participating in a stablecoin project? What are the regulatory questions and other challenges that need to be considered? We take a look at the global picture in this comprehensive analysis. What is a stablecoin? arrangements – including the role of the issuer or promoter – can vary. A stablecoin is a type of virtual currency or cryptocurrency1 for which mechanisms This article, originally produced as a are established to minimize price chapter in the Global Legal Insights fluctuations and ‘stabilize’ its value. publication ‘Blockchain and Historically, stablecoins have been used Cryptocurrency Regulation 2020’, to pay for purchases of other virtual describes some of the key legal and currencies (e.g., Bitcoin) on regulatory issues raised by the various cryptocurrency exchanges that did not forms of stablecoins internationally, with a accept cash, and as a safe-haven asset focus on collateralized stablecoins. These during periods when other virtual issues are receiving greater scrutiny in currencies experienced significant price leading international financial markets, declines. Companies like Facebook, with particularly following the announcement of its recently proposed Libra stablecoin, are Facebook’s Libra project. betting that they can overcome the regulatory and political challenges to Collateralized by fiat currency achieve widespread adoption and change Stablecoins collateralized by fiat how people make cross-border currencies have predominantly taken one remittances and payments for consumer of two main forms to date: either with (1) goods and services.
    [Show full text]
  • Quantitative Easing
    Quantitative Easing Seven years since the near collapse of the financial system following the Lehman Brothers bankruptcy, we now seem to Quantitative Easing be at a point where some central banks – the Federal Reserve and the Bank of England in particular – are close to beginning Evolution of economic thinking as it the process of reversing the very loose monetary policy they have pursued in the last seven years. But this process is likely happened on Vox to go very slowly. Moreover, other central banks – the ECB Evolution of economic thinking as it happened on Vox in particular – are not yet in such an enviable position. This means that quantitative easing is likely to remain a fascinating Edited by Wouter J. Den Haan policy that will be discussed on VoxEU.org and elsewhere for quite some time to come. This eBook is the second of the Vox As It Happened series, which gathers together the commentary on important economic issues by the world’s best economists. It maps the evolution of thinking about this policy instrument, paving the way for a more informed debate. a ISBN 978-1-907142-96-3 CEPR Press 9 781907 142963 a A VoxEU.org Book Centre for Economic Policy Research 77 Bastwick Street, London EC1V 3PZ; Tel: +44 (0)20 7183 8801; Email: [email protected]; www.cepr.org CEPR Press Quantitative Easing Evolution of economic thinking as it happened on Vox A VoxEU.org eBook Centre for Economic Policy Research (CEPR) Centre for Economic Policy Research 33 Great Sutton Street London, EC1V 0DX UK Tel: +44 (0)20 7183 8801 Email: [email protected] Web: www.cepr.org ISBN: 978-1-907142-96-3 © CEPR Press, 2016 Quantitative Easing Evolution of economic thinking as it happened on Vox A VoxEU.org eBook Edited by Wouter J.
    [Show full text]
  • Banknote Exchange Rates in the Antebellum United States*
    Federal Reserve Bank of Minneapolis Research Department Banknote Exchange Rates in the Antebellum United States* Warren E. Weber Working Paper 623 September 2002 Preliminary and Incomplete Note: The figures in this paper are designed to be printed in color *The views expressed herein are those of the author and not necessarily those of the Federal Reserve Bank of Min- neapolis or the Federal Reserve System. When the United States won independence from Great Britain in 1786, the new coun- try had only one bank. This did not remain the situation for long, however. By 1800, 28 banks were in existence. Over 250 more banks came into existence by 1820. The rapid growth continued over the next two decades, and by 1840 the country had approximately 600 banks. Although the number of banks fell during the 1840s, there was a huge expansion in the number of banks in the 1850s. As a result in 1860, just before the start of the Civil War, the country had almost 1400 banks. During the antebellum period, all banks had to be chartered by a state.1 Under these state charters, banks were permitted to issue banknotes, which were dollar denominated promises to pay specie to the bearer on demand. Banknotes circulated hand-to-hand and were the largest component of the currency in circulation during the period. Some examples of banknotes are displayed in Figure 1. As the figure shows, banknotes were distinguishable by the issuing bank, this meant that throughout the antebellum period, there were large numbers of different currencies in existence in the country.
    [Show full text]
  • Blockchain & Cryptocurrency Regulation
    Blockchain & Cryptocurrency Regulation Third Edition Contributing Editor: Josias N. Dewey Global Legal Insights Blockchain & Cryptocurrency Regulation 2021, Third Edition Contributing Editor: Josias N. Dewey Published by Global Legal Group GLOBAL LEGAL INSIGHTS – BLOCKCHAIN & CRYPTOCURRENCY REGULATION 2021, THIRD EDITION Contributing Editor Josias N. Dewey, Holland & Knight LLP Head of Production Suzie Levy Senior Editor Sam Friend Sub Editor Megan Hylton Consulting Group Publisher Rory Smith Chief Media Officer Fraser Allan We are extremely grateful for all contributions to this edition. Special thanks are reserved for Josias N. Dewey of Holland & Knight LLP for all of his assistance. Published by Global Legal Group Ltd. 59 Tanner Street, London SE1 3PL, United Kingdom Tel: +44 207 367 0720 / URL: www.glgroup.co.uk Copyright © 2020 Global Legal Group Ltd. All rights reserved No photocopying ISBN 978-1-83918-077-4 ISSN 2631-2999 This publication is for general information purposes only. It does not purport to provide comprehensive full legal or other advice. Global Legal Group Ltd. and the contributors accept no responsibility for losses that may arise from reliance upon information contained in this publication. This publication is intended to give an indication of legal issues upon which you may need advice. Full legal advice should be taken from a qualified professional when dealing with specific situations. The information contained herein is accurate as of the date of publication. Printed and bound by TJ International, Trecerus Industrial
    [Show full text]
  • Micro-Simulation of Transaction Cost Shocks on the Value of Central Bank Collateral
    A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Lennkh, Rudolf Alvise; Walch, Florian Working Paper Collateral damage? Micro-simulation of transaction cost shocks on the value of central bank collateral ECB Working Paper, No. 1793 Provided in Cooperation with: European Central Bank (ECB) Suggested Citation: Lennkh, Rudolf Alvise; Walch, Florian (2015) : Collateral damage? Micro- simulation of transaction cost shocks on the value of central bank collateral, ECB Working Paper, No. 1793, ISBN 978-92-899-1606-6, European Central Bank (ECB), Frankfurt a. M. This Version is available at: http://hdl.handle.net/10419/154226 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified in the indicated licence. www.econstor.eu Working Paper Series Rudolf Alvise Lennkh Collateral damage? and Florian Walch micro-simulation of transaction cost shocks on the value of central bank collateral No 1793 / May 2015 Note: This Working Paper should not be reported as representing the views of the European Central Bank (ECB).
    [Show full text]
  • Currency and Coin Shipments, [Circular No. 22-26]
    Circular N o. 26 FEDERAL RESERVE BANK Series o f 1922 OF DALLAS December 23, 1922. CURRENCY AND COIN SHIPMENTS To the Member Bank Addressed: This circular supersedes all previous circulars governing the shipment of currency and coin. Unless otherwise stated, the term “ Federal Reserve Bank of Dallas” includes the El Paso and Houston Branches. A branch of the Dallas City Post Office, known as “ Station K” , is located in the Federal Reserve Bank Building, and to insure prompt handling, all registered mail for­ warded to the Head Office at Dallas should be addressed, “Federal Reserve Bank of Dallas, Station K, Dallas, Texas.” The Federal Reserve Bank of Dallas will absorb all postage, expressage and insurance charges incident to shipment of currency and coin to and from member banks, as well as charges on all telegrams covering wire instructions, providing the conditions as outlined herein are complied with. INCOMING SHIPMENTS CURRENCY In order to assist us in the prompt verification of currency receipts it is requested that the following requirements as to preparation be closely adhered to as otherwise transportation costs will not be allowed. Assorting Currency must be assorted by denomination and each fifty notes or less enclosed in a paper strap marked with the amount and name of remitting bank; no strap to contain different denominations and all notes to be face and top up. Do not, under any circumstances, substitute rubber bands or clips for paper cur­ rency straps. Mutilated or torn notes must be carefully mended with paste or adhesive paper and all pins, clips and other metallic substances must be removed as they cause serious in­ jury to the machinery used in punching and cutting currency.
    [Show full text]
  • Colonial Maryland's Post-1764 Paper Money: a Reply to Ron Michener
    Discuss this article at Journaltalk: https://journaltalk.net/articles/5966 ECON JOURNAL WATCH 15(2) May 2018: 168–178 Colonial Maryland’s Post-1764 Paper Money: A Reply to Ron Michener Farley Grubb1 LINK TO ABSTRACT Ron Michener’s comment (2018) on “Non-Legal-Tender Paper Money: The Structure and Performance of Maryland’s Bills of Credit, 1767–1775” (Celia and Grubb 2016) does not concern our new approach to modeling colonial paper money or our new data reconstructions of colonial Maryland’s paper money accounts.2 Approximately 70 percent of Celia and Grubb (2016) is devoted to forensically reconstructing the paper money accounts of colonial Maryland from 1767 to 1775. Michener does not object to, or comment on, this part of our article. The data on colonial paper monies are sketchy, incomplete, and poorly documented. Celia and Grubb (2016) provides the first major data improvement in over a half-century to colonial Maryland’s paper money accounts. Kudos to my co-author James Celia, who was an undergraduate accounting major at the time, for doing the lion’s share of this forensic accounting data reconstruction. Approximately 13 percent of Celia and Grubb (2016) is devoted to offering a new approach to modeling colonial paper monies. The model decomposes the current market trade value of the average bill in circulation into its expected real asset present value (APV) as a low risk asset, the risk discount on that asset (RD), and its liquidity premium or ‘moneyness’ value (LP). The liquidity premium (LP) is the transaction premium (TP) in subsequent publications of the model (Grubb 2016a; b).
    [Show full text]