Tuesday, July 20, 2010

Potent Quotables: Under-capitalized

I don't think Katrina VanDen Heuvel understands what it means for banks to be under-capitalized.

Under-capitalization, as it is typically understood, is about ratios, not absolute values.  If a bank has too many loans on its balance sheet versus reserves, it is undercapitalized.

As an alternate interpretation, Katrina might have meant that community banks aren't big enough, which is sort of a silly statement.

What she probably means is that she thinks hedge funds are too big.  That's entirely unrelated to how much capital community banks have. She has made the typical mistake of comparing one thing to another and imagining some inequity that somebody (i.e. government) needs to correct through state force.

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In other news, I have discovered Matt Lewis' list of influential liberals on Twitter and will be using it as blog fodder.

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