Then you might be interested to read Columbia Business School professor Amar Bhide’s commentary in the new Business Week.
Economists on this forum will likely different with Bhide’s prescriptions, but they might appreciate at least some of what he suggests in this passage:
Here is my modest, quasi-libertarian, proposal: To prevent future meltdowns, let’s revive the radical idea of narrow commercial banking. Let’s tightly limit bank activity to taking deposits and making loans?loans that bankers and regulators who aren’t theoretical mathematicians can monitor. (Simple hedging to reduce the risks of making long-term loans with short-term deposits would be allowed.)
Anyone else?investment banks, hedge funds, trusts?would be allowed to innovate and speculate, free of additional oversight. But they wouldn’t be permitted to trade with or secure credit from regulated banks, except through prudent, well-secured loans. None of this would require new agencies or more regulators.
For some other recent Locker Room commentary on our current economic woes, click here, here, and here.
