Demystifying Banking: The Urgent Call for Reform by Anat Admati and Martin Hellwig
In their newly expanded book, “The Bankers’ New Clothes,” authors Anat Admati and Martin Hellwig shed light on the complexities of banking and high finance, exposing how current regulatory practices benefit bankers at the expense of economic stability and democracy. The urgency of their call for reform, particularly through higher equity requirements for banks, is emphasized by writer Hans G Despain.
Admati recently discussed the new edition at a public event at LSE, which can be viewed on YouTube. The book, titled “The Bankers’ New Clothes: What’s Wrong with Banking and What to Do about It (New and Expanded Edition),” published by Princeton University Press in 2024, aims to make banking and finance more accessible to the general public.
The authors argue that banks should be required to have higher equity levels to prevent financial crises and economic recessions. They highlight the decline in equity requirements for financial firms over the years, leading to increased fragility in the financial system.
Admati and Hellwig debunk flawed claims made by the finance industry and its supporters, emphasizing the need for proper regulations to protect society from unnecessary risks and instability. They warn that the interconnectedness of the global finance system and the reliance on short-term debt make the system vulnerable to systemic crises.
Despite promises to end bailouts, government support for struggling financial institutions continues, raising concerns about the long-term implications for democracy and the rule of law. Admati and Hellwig stress the importance of public discourse based on truth to prevent further harm to society.
Overall, “The Bankers’ New Clothes” serves as a critical analysis of the financial industry and its impact on society, urging for reforms to ensure a more stable and democratic financial system.
