Striking the Right Balance Between Private Gain and Public Good

The video discusses the influence of bankers on economic stability, highlighting the spillover effects and externalities in finance. It emphasizes the divergence between private interests and social optimality, necessitating regulation of capital ratios to prevent taxpayer burden. The challenges in maintaining lending functions in financial institutions are compared to non-financial ones, focusing on bankruptcy procedures. The core issue is the inseparability of capital structure from the banking business, posing unique challenges.

Why is it difficult to separate the capital structure from the business in banks?

What fundamental issues must be considered when thinking about the regulation of banks?