An article in the Wall Street Journal notes: Higher capital requirements effectively limit how much SIFIs can

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An article in the Wall Street Journal notes: “Higher capital requirements effectively limit how much SIFIs can borrow, and can crimp profitability.”

a. What is a SIFI? Why does the Dodd-Frank Act require SIFIs to hold more capital?
b. Why would holding more capital limit how much a financial firm can borrow and reduce the firm’s profitability?

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Money, Banking, and the Financial System

ISBN: 978-0134524061

3rd edition

Authors: R. Glenn Hubbard, Anthony Patrick O'Brien

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