ELEVEN

If Not Now, When?

Time . . . has a trick of getting rotten before it is ripe.

Francis M. Cornford (1874–1943), English classical scholar, Microcosmographia Academica, 1908

WE HAVE ARGUED that if banks have much more equity, the financial system will be safer, healthier, and less distorted. From society’s perspective, the benefits are large and the costs are hard to find; there are virtually no trade-offs. Yet the claim is often made that this reform would be costly to realize in practice. Banks are said to be unable to raise equity by issuing new shares, implying that higher equity requirements would reduce bank lending. Reduced lending, it is claimed, would hurt the economy, which has yet to recover fully from the sharp downturn in 2008. ...

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