CHAPTER 4

Why Taxpayers Need to Be on the Hook

The Financial System Cannot Insure Itself

The period immediately after a major financial crisis, such as the Global Financial Crisis (GFC) that engulfed the industrialized economies between 2007 and 2011, is one ripe for radical financial reform. Cries of “this time is different” heard during the boom are replaced with shouts of “never again” as the bust unfolds.1 Crises are the handmaidens of financial reform. For example, the requirement that a bank must publish an audited account of its assets and liabilities can be traced back to the collapse of Royal British Bank in 1856. The US Federal Reserve was created in 1913 as a direct response to the Panic of 1907. The 1929 stock market crash gave birth ...

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