This is a post about banking capital requirements, but don't turn to the Video Music Awards article just yet. This is interesting. The No. 1 cause of the mortgage disaster was inadequate equity capital requirements. Equity capital is the "down payment" on a house, the shareholder's equity in a business, the proffered cash in a securities transaction. All across the spectrum during the housing bubble economic agents were allowed to do deals with practically nonexistent capital. Houses bought with no money down. Firms like Lehman operating on 30 parts borrowed money for every one part of equity. Etc. When you have little or no equity to start with, even small reversals in the prices of the assets you're buying causes bankruptcy. That, in a nutshell, is the story of the housing blowup.

One of the terrible aspects of the Dodd-Frank financial reform legislation was its failure to do anything to beef up requirements for equity capital. Such a move would have made the system much more stable, simply and cleanly. It also would hurt Wall Street's profits. So it's great to see the international Basel III requirements doing what Washington couldn't bring itself to do. Matt Yglesias has the story.