As I noted in this morning’s Sunday Talking Heads thread, Bill Moyers sat down with Anat Admati, the George G.C. Parker Professor of Finance and Economics at the Graduate School of Business at Stanford.
From Yves Smith:
Anat Admati, along with Simon Johnson, has been one of the most forceful advocates for having banks carry much higher levels of equity than they have in recent decades. In this interview with Bill Moyers, Admati stresses how little has been done to fix the underlying problem: that banks are subsidized to borrow, that creditors are confident that large banks will be rescued and hence don’t exercise any adequate discipline, and that they therefore have a “heads I win, tails you lose” deal with the rest of society.
Too Big to Fail and Getting Bigger Transcript.
Admati “has written extensively on information dissemination in financial markets, trading mechanisms, portfolio management, financial contracting, and, most recently, on corporate governance and banking. Since 2010, she has been active in the policy debate on financial regulation, particularly capital regulation, writing research and policy papers and commentary. She is a coauthor [with Martin Hellwig] of the book, The Bankers’ New Clothes: What’s Wrong with Banking and What to Do about It.
Here’s from an excerpt online:
Although they can put in place any laws and regulations that they see fit, politicians are not in the driver’s seat in their relation with banks. Bankers know more about banking than politicians. Moreover, politicians want the bankers’ cooperation to make the investments the politicians favor — or campaign contributions. When bankers warn that capital requirements will hurt bank lending and reduce economic growth, they are rarely challenged by politicians, not only because politicians do not see through the banks’ claims but also because they do not want to upset their symbiosis with bankers.
Bankers and politicians have a two-way dependence. In this situation, politicians can forget their responsibilities, and the political system fails to protect the economy from banking risk. Even after the financial crisis, as one politician admitted, the banks “own the place.”
The three decades leading to the financial crisis of 2007–2009 were marked by enormous growth in the financial sectors of the United States and Europe. Banks and financial firms convinced politicians and regulators that tight regulations are not needed because markets work well enough. Bankers gained prestige and wealth and their political influence increased. An anti-regulation ideology helped as well. …
You can find Anat Admati on twitter @anatadmati