A Too Big to Fail Tale

financial intermediaries and Greek ATMs running dry
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Comments (2)
  1. Terry O says:

    To understand this problem, you almost need to go back to the garden of Eden. The “bite of the apple” that got it rolling was the creation of deposit insurance.
    Deposit insurance allowed banks using unsound lending practices to access nearly unlimited funding, because depositors were effectively insulated from this risk.
    Before deposit insurance, you had bank runs, but depositors were a LOT more choosy when selecting a place to put savings.
    Not sure it is possible to turn back the clock, but that is the “rest of the story”.

    1. No we cannot turn back the clock. But interesting to contemplate.

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