We had a solution to fix the problem
Reader comment on: Cochrane and the Economist on Dodd-Frank
Submitted by Lyle (United States), Mar 7, 2012 17:40
It would be to have brought Glass Steagall back and give it some more teeth. Separate the Broker from the dealer function allowing banks to have the broker function but solely as an order taker, no advice allowed. Then limit the leverage of investment banks by making them unlimited liability companies or perhaps at least making all active employees above a level the equivalent of the old partners with the public owners being limited partners. The idea is that the folks that make the decisions should be on the hook to the last dollar they own for their decisions.
Recall that for a while after 1865 national bank stock for example carried a 2x the par value liabilty.
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