The fall in the non-interest outlay share of GDP largely reflected lower defense spending as the Cold War came to an end, but other spending also was fairly well restrained. At least until the past few years, the statutory caps helped to hold nondefense discretionary expenditures in check, and the 2 pay-as-you-go rules forced careful consideration of deficit-expanding initiatives.
While these firms' leverage ratios may become less binding as the Federal Reserve reduces the size of its balance sheet and reserves are drained from the banking system, leverage ratios that discourage banks from intermediation in the Treasury market, or from holding ultra-safe assets such as Treasuries and reserves, can distort incentives and disrupt markets.