Paul Krugman on the importance of bank regulation

At his blog, Nobel Prize economist Paul Krugman succinctly explains the importance of banking regulation and why Barack Obama must fight for it—and win:

I’m reading Gary Gorton’s Slapped by the Invisible Hand, which tells us that there were bank panics — systemic crises — in 1873, 1884, 1890, 1893, 1896, 1907, and 1914.

On the other hand, there were no systemic crises from 1934 to 2007.

The problem, as Gorton makes clear, is that the Quiet Period reflected a combination of deposit insurance and strong regulation — undermined by the rise of shadow banking. So we have a choice: restore effective regulation or go back to the bad old days.

The bad old days. As in 1873, 1884, 1890, 1893, 1896, 1907, 1914, 1929, and George Bush’s America.

About Santi Tafarella

I teach writing and literature at Antelope Valley College in California.
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