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Effective Financial Reform

Key Points

  1. All financial crises are runs, no more and no less.
  2. Equity-financed banking prevents bank runs and therefore makes the system immune to financial crises.
  3. Equity-financed banks are financed with equity and back up all deposits with short-term Treasury bills or other risk-free liquid assets like interest paying reserves.
  4. Depositors or creditors would always be able to get their money back, eliminating the threat of bank runs.
  5. By removing debt financing and the risk of bank runs, equity-financed banks would require far less regulation.
  6. Run-free financial systems would be innovative, competitive, and better for the economy.