The Cato Institute’s Arnold Kling tells me that in order to solve the “too big to fail” problem we should consider breaking up the big banks.
Here are some highlights from our discussion:
1:20: Big banks aren’t the result of a free market in banking. In fact, they’re quasi-governmental like Fannie and Freddie.
4:40: Aren’t there economies of scale in having “superbanks” that outweigh the risks?
5:45: Will limiting the size of banks rid us of the risk of bank failures?