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Is it possible to run a complex world in a simpler way?
I think you certainly can. And you certainly can run a complex world that makes it even more complex. And I think that Dodd-Frank and probably the Volcker Rule are the essence of complexity. They just don’t substitute for what Glass-Steagall gave us.
How do you respond to the idea that the way to avoid complexity with the banks is to ask for more capital and less leverage?
That is certainly a step in that direction. But you cannot simply say the banks need more capital without saying that maybe a better answer is to tone down these institutions, break them up, have them sell off certain divisions, change the level of complexity. Without that, there simply is not enough capital to provide protection against the kind of events we have had in recent weeks.
I’ve been reading Why Are There So Many Banking Crises? by economist Jean-Charles Rochet. He says that politicians lack the courage to step up and get in the way of normal greed in finance. Where is the courage in our politicians to do this?
There is no courage. I don’t know of a single member of Congress who is willing to resist the seductions of money and campaign contributions and the kind of flattery that comes from those who have special interests.