Worse, the risk that all the failings of financial capitalism, accumulated over 40 years, will become apparent simultaneously is very high: markets built on the flimsiest of foundations, such as the zero cost of capital that most banks have enjoyed for the last decade,
Zero cost of capital for banks? When?
We’ve driven up the cost of capital for banks since 2008. Insisted they hold more capital. Investors have demanded higher returns in return.
Banks have enjoyed near zero cost of funds this past decade, true. But anyone writing about banking had better know the difference between capital and funding, no?
And think through Snippa again. If banks had a zero cost of capital then they’d have lots of it. And that would be good in an emergency, not bad, right?