Can the Canadian banking model work for the U.S.?

No, and Simon Johnson explains why.  Excerpt:

Proposing a Canadian-type model to create stability in the U.S. is, to be blunt, nonsense.  We would need to merge our banks into even fewer banking giants, and then re-inflate Fannie Mae and Freddie Mac to guarantee some of the riskiest parts of the bank’s portfolios.  With our handful of new “hyper megabanks”, we’d have to count on our political system to prevent our banks from going wild; Canada may be able to do this (in our view, the jury is still out), but what are the odds this would work in Washington?  This would require an enormous leap of faith in our regulatory system immediately after it managed to fail repeatedly and spectacularly over thirty years (see 13 Bankers, out next week, for the awful details).  Who can be confident our powerful corporate lobbies, hired politicians, and captured regulators can become so Canadian so soon?

There is much more at the link, recommended.


Comments for this post are closed