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Reducing Risk with Equity-Financed Banking


Published May 12, 2022

John Cochrane talks about the inexorable logic employed in current financial regulations and the alternative of equity-financed banking. The Federal Reserve has assumed a larger role in keeping asset prices from falling. The culmination of this overreach is the Fed’s new move to use financial regulation to have an effect on climate change and income inequality.

Discussion Questions:

  1. Are the best solutions to problems always politically feasible? Why?
  2. In what ways has the Federal Reserve assumed a larger role than it has in the past?

Additional resources:

  • Watch “How Government Policy Inflates Health Care Costs: The Curse of Cross-Subsidies,” with John Cochrane on PolicyEd. Available here.
  • Watch “Does Government Debt Matter Anymore?” with John Cochrane on PolicyEd. Available here.
  • Read “Why Hasn’t the Fed Done More to Fight Inflation?” by John Cochrane via Chicago Booth Review. Available here.