- To Big To Fail Banks should be broken up. There should be a size limit for banks. There should be many small banks, but no big banks.
- Capital controls should be increased to 25%. The somewhat complex Basel weighting of assets classes should be abolished.
- Credit unions should be encouraged (perhaps by less taxes). But private banks should not be banned.
- The government should be forbidden, by constitutional amendment, from bailing out banks under any circumstances.
- All internal books of all banks, that is, all records of all transactions, should be made completely public, except that the names of counterparties may be obscured (actually i wouldn't mind if the names of counterparties were not obscured). This is so that third parties can themselves assess the risk taken on by banks, rather than having to trust regulators to do so.
- There should not, however, be limits on what type of transactions banks can do. These sort of regulations do not solve the problem (since new problems will always come up that the regulators cannot predict in time), and they are pernicious because their existence causes an intertwining of government and banks that ends up benefiting the bigger banks at the expense of the small, and because true financial innovation does exist and does make the world a better place.
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