Banking System Today: Regulations, Equity Funding, and Economic Impact

It's been nearly 16 years since the federal government bailed out Wall Street to the tune of $700 billion in response to the financial crisis that precipitated the Great Recession. The idea that the public must guarantee critical financial institutions that are “too big to fail” was controversial then, but does it still remain an issue? Stanford finance professor Anat Admati, whom the New York Times profiled in an article titled "When She Talks, Banks Shudder," argues it’s become worse.

Admati joins Bethany and Luigi to discuss the updated edition of her and Martin Hellwig’s book, The Bankers' New Clothes: What’s Wrong with Banking and What to Do About It. Dissecting new financial developments, including the failure of Silicon Valley Bank, the crypto industry, and shadow banking, Admati lays bare how the current financial system is rigged for the benefit of the few. She also prescribes how we can build and regulate a fairer and more accountable financial system and, thus, a more stable and equitable capitalist economy.

Show Notes:

• Read the 2024 preface of The Bankers' New Clothes on ProMarket.
• Revisit our 2019 conversation with Anat and Chicago Booth Professor Guy Rolnik, exploring the reasons why market and policy may fail in finance and technology and what we must do to address such failures.
• Read Anat's contributions to our e-books on George Stigler and Milton Friedman.