There's a political deal that's underneath this. And especially y. As we were talking about the coalition betweenpop ists and bankers and megga bankers in the a, 19 nineties and early two thousand,. There's a coalition between small bankers and farmers in the nineteenth century. Theres no efficiency or stability criteria by which you would do this. It did, however, work well for local unit bankers because they had captive local markets - sentuy. They ran local monopolies. So that that created this sort of cosy arrangement, good for the local farmers, good for in the north and midwest, good for unit bankers but bad for anybody else who wanted access to credit
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.