The Consequences of Bank Regulation

The incentives in bank regulation are so messed up and so many people have an interest in having a messed up. The first republic was offering non-government guaranteed mortgages to in jumble amounts at fixed rates, sometimes for 10 years before they changed the floating. If you run a bank and you screw it up, you're still a rich guy. And the clubs don't drop you. That is not a good lesson. It teaches people who are holding the behavior of the economy on their hands. So I think there's some work to be done. But I don't think it's not a difficult problem. It's just we've screwed up the answer."