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Downsizing the behemoths over time into institutions that can be prudently managed and regulated across borders is the appropriate policy response.
The president of the Federal Reserve Bank of Dallas, Richard W. Fisher, broke ranks with most of his colleagues within the central bank last week, declaring, "The disagreeable but sound thing to do regarding institutions that are too big to fail is to dismantle them over time into institutions that can be prudently managed and regulated across borders".
"Winston Churchill said that 'in finance, everything that is agreeable is unsound and everything that is sound is disagreeable.' I think the disagreeable but sound thing to do regarding institutions that are TBTF is to dismantle them over time into institutions that can be prudently managed and regulated across borders," Fisher said.
Private lenders- often in the lightly regulated shadow banking sector- failed royally to prudently underwrite loans, price risk and disclose information to insurers, investors, borrowers and regulators.
Regulated more?
Not regulated.
Fully regulated.
Regulated food!
It is easier to regulate against risk-taking than to convince banks to take risks prudently.
Regulating banks?
Regulate it.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com