"It is not impossible to devise a fractional reserve regulatory system that will work if its practitioners are expert bankers and fully appraised of everything that its banks are engaged in post reform. But this is fraught with risks.
A far easier solution for Iceland is to make one simple law change. Grant depositors title to their deposits, stipulate that the state and taxpayers will never again bail out the banks, and allow free market forces to create a safe and transparent banking system. A ban on the maturity mismatching of assets, combined with a clear policy of NOT bailing out the banks in future, will enable free markets to flourish.
Do not blame the bankers, they were merely acting like rational capitalist players in a wrongly regulated system. If we are to allocate blame then look to yourselves right here in the Brussels Parliament. It is you rulemakers who have made the mistakes. You should have worked this out."
Wednesday, June 02, 2010
Iceland and the Western Banking System
Excellent Insight piece by Gordon Kerr, at The Cobden Centre: