James Kwak makes a simple solution to reduce the size of banks that
have gotten too big in almost everyone estimation. So far they (the regulators
i.e. Ben Bernanke of the Governor of Governors) have been trying to tweak the system by making
banks have higher levels of capital to force them to be smaller. It didn’t
work. You can try all types of incentives, but there are regulatory bodies, I
think, that just can make them smaller.
As Kwak says, “If the goal is
smaller, less complex banks, why not just mandate smaller, less complex banks.”
Is that just too simple? Kwak uses the analogy of not wanting guns on planes by
making a charge of $100 to take a gun on a plane. Stupid, do what we do, just
don’t allow guns on planes.
Sometimes solutions can be simple.
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