Bank Breakup Worries
Monday, November 3, 2014
I do not believe that having smaller banks would have prevented the 2008 crisis or the next crisis. I do not believe that regulatory policy can prevent such crises. My only solution for systemic financial risk is to try to make the financial system easier to fix when it does break. I think it is easier to fix when there is less debt, so I would look for ways to reduce incentive to take on debt. Instead of subsidies for mortgage borrowing, how about subsidies for down-payment saving? Instead of favorable tax treatment for debt, why not favor equity–or at least be neutral between the two? etc.