From The Heritage Foundation and National Affairs:
Monetary Policy/Financial Regulation
How to Regulate Bank Capital
by Charles W. Calomiris
National Affairs
January 05, 2012
A proper understanding of the dynamics of the recent crisis — of how rules interacted with incentives to make excessive risk far too attractive and to give bankers no reason to behave responsibly — can point us toward a set of rules that offer far better protection at relatively low cost to all involved. It is time to recognize at last that rules that fail to account for financial incentives are bound to fail, and that harnessing the disciplining power of markets — rather than replacing it with the supposed cleverness of regulators — is the only way to prudently keep our banks in check while also enabling economic growth.
URL: www.nationalaffairs.com/publications/detail/how-to-regulate-bank-capital
Monetary Policy/Financial Regulation
How to Regulate Bank Capital
by Charles W. Calomiris
National Affairs
January 05, 2012
A proper understanding of the dynamics of the recent crisis — of how rules interacted with incentives to make excessive risk far too attractive and to give bankers no reason to behave responsibly — can point us toward a set of rules that offer far better protection at relatively low cost to all involved. It is time to recognize at last that rules that fail to account for financial incentives are bound to fail, and that harnessing the disciplining power of markets — rather than replacing it with the supposed cleverness of regulators — is the only way to prudently keep our banks in check while also enabling economic growth.
URL: www.nationalaffairs.com/publications/detail/how-to-regulate-bank-capital
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