Risks in banking can impose significant costs on the economy. The authors examine the claim that that a safer banking system would require sacrificing lending and economic growth, exposing as invalid the narratives used by bankers, politicians, and regulators to rationalize the lack of reform. We can have a safer and healthier banking system without sacrificing any of the benefits of the system, and at essentially no cost to society. Banks are fragile not because they must be, but because they want to be—and they get away with it. Whereas this situation benefits bankers, it distorts the economy and exposes the public to unnecessary risks. Weak regulation and ineffective enforcement allowed the buildup of risks that ushered in the financial crisis of 2007–2009.
|(ECONOMIC CRISIS * BANKING REGULATION)