From exam idea to foundational papers

Financial crises are "everywhere and always" a problem of short-term debt. In this Extra Slice of The Pie, Nobel laureate Douglas Diamond explains his groundbreaking research on why banks exist in the first place, and why they're vulnerable to runs. Diamond discusses his role advising policymakers during the 2008 crisis, reflects on predicting the savings and loan disaster as a graduate student in the 1970s, and explains why the 30-year mortgage is like Michael Corleone: something good that went bad when it hung around with the wrong crowd.