Because under a system where margin requirements are effectively enforced, bankers can pay each other all the bonuses they want without irritating public scrutiny of their remuneration.

Of course, there won't be as much easy money around to pay bonuses with...

But actually, the problem is convincing the central bank to do this. The retail banks can be bought simply by paying the policy rate on regulatory reserves as well as excess reserves. Do they deserve that subsidy? Arguably yes, since regulatory reserves arise when people deposit money (or keep borrowed money) in the bank. So the difference between the support rate and the retail rate would be the government subsidy for banks who manage the payment clearing infrastructure.

- Jake

Friends come and go. Enemies accumulate.