In a novel approach to resolving the “too big to fail” bank issue, Tyler Cowen, a professor of economics at George Mason University, suggests expanding the liability for big banks. “If a shareholder invests a dollar in a big bank, why not make that shareholder liable for the first $1.50—or more— of losses as insolvency approaches?” Cowen asks. “In essence, we would be making the shareholders liable for the costs that bank failures impose on society, and making the banks sort out the right mixes of activities and risks.”
It is a suggestion certainly worthy of more analysis. More regulation will not necessary stave off a future financial crisis, and limiting the size of banks may in turn limit the size of our economic growth. Creative answers like Cowen’s are exactly they way we should be thinking toward a more productive future.
Here is a link to Cowen’s article in the New York Times: Break Up the Banks? Here’s an Alternative.
Gregg D. Killoren
victoria1014
