An editorial in this morning's Wall Street Journal about Jon Corzine and the bankruptcy of MF Global asserts: "To prevent future bailouts on this side of the Atlantic, the key is to understand that big-bank CEOs can also be tempted to pull a Corzine. To protect taxpayers from the consequences, the solution is very high capital standards for the biggest firms."
It would be nice to know how high the Journal thinks these "very high" capital standards should be, how it thinks such capital should be measured, who should set the standards, and what qualifies as a "biggest" firm. It's all easier said than done, in my view. In the worst case scenario, you end up with bureaucrats in Basel setting standards that make the American economy worse instead of better. Maybe a better way of preventing future bailouts is to just not have bailouts, rather than to try to construct some sort of regulatory scheme to prevent them that inevitably isn't going to succeed and that will have all kinds of unintended consequences.
