Charles calamirus and stephen haber write a book called fragile by design. They argue that it is impossible to take politics out of bank regulation because there are inherent conflicts of interest between government and banking systems. When banks fail, governments often have reasons not to enforce debt contracts on behalf of the banks.
Charles Calomiris of Columbia University and Stephen Haber of Stanford University, co-authors of Fragile by Design: The Political Origins of Banking Crises and Scarce Credit, talk with EconTalk host Russ Roberts about their book. The conversation focuses on how politics and economics interact to give some countries such as Canada a remarkably stable financial system while others such as the United States have a much less stable system. The two authors discuss the political forces that explain the persistence of seemingly bad financial regulation. The conversation includes a discussion of the financial crisis of 2008.