This problem will not be solved by calls for more stress tests and scenarios or by new principles of liquidity management. You need a definition of (narrow) regulatory liquidity and a quantitative benchmark for it. I have some ideas on how such a liquidity standard could be designed so that commercial banks and investment banks have adequate owned liquidity, don’t hoard that liquidity, and don’t draw unduly on the Fed for liquidity We should seek an international agreement on liquidity standards, but until we get it, we should impose our own national standard
