33 Pages Posted: 11 Jul 2013 Last revised: 12 Jan 2016
Date Written: December 2015
The debate on banking regulation has been dominated by flawed and misleading claims. The title of our book The Bankers New Clothes: What’s Wrong with Banking and What to Do about It (Princeton University Press, 2013, see bankersnewclothes.com) refers to flawed claims about banking and banking regulation, and the book discusses and debunks many of them.
Flawed claims are still made in the policy debate, particularly in the context of proposals that banks be funded with more equity and less debt than current or new regulations would allow. Those who make the flawed claims do so without addressing our arguments, even when commenting on the book or on our other writings. Because the financial system continues to be dangerous and distorted, however, flawed claims must not win the policy debate.
This document provides a brief account of claims that we have come across since the book was published in February, 2013. We provide brief responses, with references to more detailed discussions in the book and elsewhere.2 Many claims are asserted without any justification. Some of these claims are simply false or based on fallacious reasoning. Other claims are misleading or irrelevant, for example confusing costs and benefits to banks or bankers with costs and benefits to society, which must be the focus of policy. Still other claims are based on implausible theories that ignore important parts of reality.
We first provide a list of the flawed claims that the rest of this document takes on. References to chapter numbers refer to our book. Nothing that we heard or read changes our conclusions or our strong policy recommendations.
Keywords: capital regulation, financial institutions, capital structure, capital regulation, too big to fail, systemic risk, bank equity, contingent capital
JEL Classification: G21, G28, G32, G38, H81, K23
Suggested Citation: Suggested Citation
Admati, Anat R. and Hellwig, Martin F., The Parade of the Bankers’ New Clothes Continues: 31 Flawed Claims Debunked (December 2015). Rock Center for Corporate Governance at Stanford University Working Paper No. 143; Stanford University Graduate School of Business Research Paper No. 15-58. Available at SSRN: https://ssrn.com/abstract=2292229 or http://dx.doi.org/10.2139/ssrn.2292229
By Anat Admati