In banking industry, there are problems happen all the time.
Free banking truly benefited market before, but when problems appear, we still
need to correct them and make problems in control, and can we say the process
of correcting would not be a process of regulating? Just like those examples in
the previous posts, we see free banking result in crisis and reborn in a
regulated banking system which has removed the previous risks away.
Some people say that financial crisis is still happening
even in the regulated banking system, but let us go back to the original point. In
the book of “financial regulation why, how and where now?”, Goodhart, etc. said
that “one rule can never fit all,
regulations inevitably distort the economic outcome, possibly so much that the
end result is worse than the unregulated starting point”. But problems still
coming up and regulations have been required by people, not all risks are taken
into account but the purpose of regulation is just removing all risk away. As a
result, we need regulation and regulation must be keep upgrading to form a more
healthy banking system.
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