For subscribers
Four ways to fix the bank problem
It is not clear how bad this crisis is going to be but reform is urgently needed.
Sign up now: Get ST's newsletters delivered to your inbox
The difference between the book value of the assets and debt liabilities of US commercial banks was US$2,137billion.
PHOTO: REUTERS
Martin Wolf
Banks are designed to fail. And so they do. Governments want them to be both safe places for the public to keep their money and profit-seeking takers of risk. They are at one and the same time regulated utilities and risk-taking enterprises.
The incentives for management incline them towards risk-taking, just as the incentives for states incline them towards saving the utility when risk-taking blows it up. The result is costly instability.
