When Banks Are Too Big to Behave

In the wake of the LIBOR banking scandal, Professor of Economics Richard Grossman recently spoke to the Canadian news magazine Maclean’s about banking regulation throughout history. “It’s guaranteed to be a losing battle,” he says. “The incentives in banking are so strong and the money is so big. As soon as you close off one area, someone is going to think of a new way to do things.” He adds that governments and the public have a short memory when it comes to financial crises, so that regulations that seem prudent in one era become the next generation’s “political red tape.”