Tuesday, March 26, 2013

Michael Pettis on reckless bankers

in Why the world needs reckless bankers

"In fact, long-term wealth creation accrues most to societies in which the financial system most willingly funds risk-taking entrepreneurs. But the more a financial system is willing to finance risky new ventures, the greater the likelihood of banking instability.
We should allow localised – manageable – banking crises to occur more often.

What might in fact be best for the US and the world may be more and smaller banks, tougher and even ruinous competition, more bankruptcies, more kinds of financial institutions and a regulator whose main function is to enforce transparency and to manage periodic crises with countercyclical measures. Perhaps then we might even prefer a little more 19th-century-style “reckless banking”.'

No comments: