Fed Runs Scared With Boost to Bank Dividends: Anat R. Admati

People become scared when ex-regulators or bankers warn that growth might be hurt or that the recovery would be slowed if we fail to do something. The Federal Reserve seems scared, too, or maybe captured, since it is about to allow increased dividends from banks.

The Fed should know better. Allowing high payouts to shareholders raises financial institutions’ leverage and that is bad for the economy.