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Taleb, Summers do battle over financial crisis | CNBC

The debate roared back and forth, with Summers pressing Taleb to go beyond enunciating what he thought was wrong and instead come up with a better solution than the one used to bring the financial system off the brink after Lehman Brothers failed.

“I’m for more capital, I’m for more liquidity, I’m for more pressure from the government to have proper risk models that recognize fat tails as part of our regulatory system,” Summers said. “I’m for stress testing that makes much more data available so that analysts outside of institutions can judge the risk. I’m for the development of living wills and procedures that if an institution fails it can be resolved.”

“I’m not for the government designing the compensation systems of financial institutions. I’m not for the government running financial institutions,” he said. “I’m for making them much more failure-proof and more safe for failure when they do fail. What are you for?”

Taleb advocated a system where banks are run more like utilities and excessive risk-taking is limited to hedge funds and investment banks.

“Let’s go back to when banks were boring and were utilities and were not taking too much risk with taxpayer money,” he said. “A utility should not be a casino. It’s a very simple point.”

via Taleb, Summers do battle over financial crisis.

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