Salient to Investors:

Clive Crook writes:

The US and advanced economies have not done enough to head off the next financial meltdown.

Gain made in safety is likely to be too small even to offset the danger created since the crash by greater concentration in the finance industry.

The emerging framework of regulation is no great departure from the one that failed in 2008.

Historically, banks judged it necessary to finance as much as 25 percent of their lending with equity, and research finds a leverage ratio of 10 percent is the safe minimum.

The past 5 years have shown that in a crisis of confidence, big financial conglomerates amplify rather than absorb risk, worsen contagion, and narrow down to nothing the choices available to governments.

The benefits of conglomeration for customers are doubtful at best. Regulators should be trying to separate different lines of business.

The distinctive characteristic of the crash of 2008 was the part played by a new kind of run on financial systems. Depositors did not line up to get their money out. Banks et al faced collapse because non-deposit funding dried up – the breakdown was in wholesale not retail.

Daniel Tarullo at the Fed said there is not yet a blueprint for addressing the basic vulnerabilities in short-term wholesale funding markets.

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