A series of recent studies (Admati et al., 2011; Miles et al., 2011; Angelini et al, BIS, 2010; Kashyap et al., 2010) explain clearly the theory behind the fact that changes in capital ratios had historically no such effects or, at least, not in a magnitude claimed by the industry. As Admati et al.
My proposal that Fed governors should signal their commitment to public service by wearing Hawaiian shirts and Bermuda shorts has so far gone unheeded. Although the dress code continues to be a drawback, I am pleased to be able to report that the intellectual challenges of my new job have been as rewarding as those I encountered as an academic.