Eugene White on Bank Regulation

Eugene White talks with host Russ Roberts about the regulation of banks and financial crises. He argues that most regulation tries to limit the choices of banks to restrain them from making choices that create instability or fragility. A better approach, he argues, is to change the incentives facing bankers so that they would be encouraged to make prudent choices without the need for top-down monitoring. He shows how in the 19th century various regulations and market results encouraged stability and prudence while some regulations made the system more fragile. White discusses the lessons for the current crisis and what might be done to improve the current state of regulation.