[Another commentary and rebuttal to NNT's recent NYT 'End Bonuses for Bankers' piece. Again, it would be nice if these articles were based on the larger context of NNT's entire Bailout commentary rather than a single opinion piece. JH]
End deposit insurance: a simple heuristic for a complex problem. Taleb of all people should appreciate that we need firms to have the freedom to pursue a variety of different organizational strategies to survive and flourish. If the problem is excessive risk-taking, and I think it may well be, deposit insurance pours fuel on the fire. Eliminate it for large financial institutions and the competition won’t be over which can make the biggest bets, but rather which can attract the most depositors by being as stodgy and risk-averse as possible. The bonus “problem” will solve itself.
Link to full story: End Deposit Insurance, Not Bonuses – By Reihan Salam – The Agenda – National Review Online.
HatTip to Dave Lull.