Capital requirements could hurt banks

Part 1: Preventing another financial crisis

Big plans for business in 2018?
Give yourself the tools to own the new year at Connect SF, July 17-20, 2018

While policymakers and their kibitzers, among which I count myself, debate what is needed to cure the current crisis and associated recession, another debate brews in the background. It is about how to fix the system so that it doesn’t happen again.

Any coherent proposal for fixing the system is necessarily based on judgments about the causes of the current crisis. While there are many differences in emphasis, I believe that most observers would agree on the essentials: The crisis originated with a bubble in the residential real estate market, followed by its inevitable aftermath of declining home prices, and a subsequent explosion of home mortgage defaults and foreclosures.