Regulators misprice assets during interventions: Richmond Fed
A Richmond Federal Reserve paper, published on Tuesday, says monitors that track banks' asset values may have erroneous effects on regulatory interventions.
Douglas Davis, Edward Prescott and Oleg Korenok, the paper's authors, evaluate the consequences of having a socially motivated monitor that uses the market price of a bank's traded assets to decide whether or not to intervene in the bank's operations. Interventions range from replacing a bank's management team to extending central bank
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