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while all of this makes sense, the premise that banks are fragile because of regulations is “cart before the horse” kinda logic. the universe doesn’t owe bankers a successful business. if the bankers cannot operate under those conditions, then either (a) they should not have started a bank or (b) if they bank was already operating when some of these regulations were imposed, then they should have recognized their inability to operate under such conditions and either sold their banks or closed up shop. where one could argue that this would have put pressure on the economy since lending would quickly drop with less banks and options for borrowers, then regulators & legislators would then be forced to change/modify the regulations to stimulate the economy. i just can’t buy, “the regulations made me do it” sort of argument 😉
The point of emphasizing the role of foolish regulations isn't to let bankers off the hook: not everything ( and precious little economic analysis) is about assigning blame or determining guilt! My own purpose was simply to offer a more careful diagnosis of past banking ills that shows how some banking systems could have been made a lot safer by regulating them less, not more. If you see the research as merely saying, "It wasn't bankers' fault!", you've missed its (really not very obtuse) point.
The problem is, unstable banks are bad for everyone, not just bankers. It might be the bankers' fault in the end, but saying that without changing policy does nothing to help depositors or third parties affected by systemic risk.
while all of this makes sense, the premise that banks are fragile because of regulations is “cart before the horse” kinda logic. the universe doesn’t owe bankers a successful business. if the bankers cannot operate under those conditions, then either (a) they should not have started a bank or (b) if they bank was already operating when some of these regulations were imposed, then they should have recognized their inability to operate under such conditions and either sold their banks or closed up shop. where one could argue that this would have put pressure on the economy since lending would quickly drop with less banks and options for borrowers, then regulators & legislators would then be forced to change/modify the regulations to stimulate the economy. i just can’t buy, “the regulations made me do it” sort of argument 😉
The point of emphasizing the role of foolish regulations isn't to let bankers off the hook: not everything ( and precious little economic analysis) is about assigning blame or determining guilt! My own purpose was simply to offer a more careful diagnosis of past banking ills that shows how some banking systems could have been made a lot safer by regulating them less, not more. If you see the research as merely saying, "It wasn't bankers' fault!", you've missed its (really not very obtuse) point.
The problem is, unstable banks are bad for everyone, not just bankers. It might be the bankers' fault in the end, but saying that without changing policy does nothing to help depositors or third parties affected by systemic risk.