If you need yet more evidence that the Dodd-Frank financial regulations will do little to solve the finance-related problems associated with the Great Recession, here’s the opening exchange of a Money magazine interview with Stanford finance and economics professor Anat Admati.
The Big Question: Are we at risk of another banking crisis?
Oh, yes. Definitely. We continue to have a system that’s way more prone to crisis than it needs to be.
Why are we still vulnerable?
Banks continue to be much too highly indebted and interconnected. That means they all tend to get in trouble at the same time, and the failure of one can take down others. It creates a contagion that spreads through the economy. As with speeding, everything is fine as long as you don’t have an accident. When you have an accident, others can get harmed.