It is not clear how bad this crisis is going to be but reform is urgently needed
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Mar 21, 2023 / 11:39 AM IST
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Mar 21, 2023 / 11:39 AM IST
All Rights Reserved. FT and Financial Times are trademarks of the Financial Times Limited Not to be redistributed, copied or modified in any way.
The intermediation might be done by banking institutions, but ones funded by a mixture of equity, bonds and time deposits, not sight deposits. (Representative image)
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.
If one thing is clear about the…