Newswise — When the Federal Reserve raises interest rates to slow down a speeding economy — effectively raising the price of money — banks often sell down their stockpile of securities to keep the financial assembly lines going. That’s much like a widget-building company might rely on a warehouse of raw materials when prices rise. But according to Anthony Meder, assistant professor of accounting at Binghamton University, federal accounting rules can padlock those warehouses, particularly hurting small banks and their customers. “They just don't have the funds to lend. They have less access to other funding resources — commercial paper, exotics,” said Meder.

When the Federal Reserve raises rates, and banks look to sell excess securities to maintain liquidity, those banks holding too much in hold-to-mature securities are stuck with a warehouse full of cash they can’t use. Small businesses in particular have a tough time getting cash they need to grow, said Meder.

“Regional banks are where the local businesses tend to go,” he said.

Anthony Meder is an assistant professor of accounting at Binghamton University. His research interests include: financial accounting and reporting; accounting for financial institutions;and accounting and debt contracting.

Resume: https://www.binghamton.edu/som/faculty-research/AnthonyMederCV.pdf