link here to article
Alan Greenspan tells us that higher capital requirements for banks would lead to the stagnant use of resources. This article explains the fallacy. It does not explain why Greenspan is advancing the idea. His major clients are Wall Street bankers whose compensation is based on return on equity. The higher the equity they have to hold, the lower their potential compensation. Of course this also means less risk that needs to be supported by the taxpayer. Banker compensation is dependent upon the subsidization of risk by the taxpayer. Its an insurance policy with no premium demanded.
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