Michael Stephens — Minsky and Financial Reform’s “Never Ending” Struggle

In a new policy brief, Jan Kregel looks at a lesser-known, early period of Minsky’s work on financial reform. In the ’60s, Minsky was a consultant to a number of government agencies, including the Federal Reserve, on issues related to financial regulation. In this context, he came up with a new approach to bank examination, which he called “cash-flow based.” The new approach evaluated bank liquidity, not as an innate feature of a particular class of assets, but as a function of the balance sheet of the institutions under examination, the markets for those assets, the state of the macroeconomy and the financial system as a whole, and much else. In fact, as Kregel explains, what Minsky was after here was related to an early form of what we now call “macroprudential regulation.”

Multiplier Effect
Minsky and Financial Reform’s “Never Ending” Struggle
Michael Stephens