President Obama "invited Admati and five other economists to a private lunch to discuss their ideas." One of those other five economists was the notorious anti-Wall Streeter Paul Krugman.
In "The Banker's New Clothes: What's Wrong With Banking and What to Do About It," Admati argues (along with coauthor Martin Hellwig) that because banks don't use their own money, they take greater risks and, as a result, "they keep crashing the economy."
Her solution is to "make banks behave more like other companies by forcing them to reduce sharply their reliance on borrowed money," according to The Times article. She suggests that "large banks should be required to raise at least 30 percent of their funding in the form of equity" — which is "six times more than the current average for the largest American banks."Business Insider
This Stanford Economist Has Obama's Attention — And It's Causing A Wall Street Freak-Out
Elena Holodny
