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Toward a Run-Free Financial System
Report

Toward a Run-Free Financial System

Chicago Booth, 2014 more...

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Editorial Rating

7

Qualities

  • Analytical
  • Overview

Recommendation

In 2008, runs on financial institutions had a devastating impact on the world’s economy. University of Chicago professor John H. Cochrane says runs were the major culprits behind the crisis and believes the same thing could easily happen again in today’s environment. He explains why overregulation will not work, and advocates restructuring the financial system through measures such as shoring up bank equity and avoiding run-prone assets. Cochrane effectively pokes holes in the current American financial and regulatory systems. His proposals, many of which echo those under consideration in Europe, may make sense for the United States as well. getAbstract recommends this report to financial executives, analysts and policy makers who might be intrigued by this line of thinking.

Take-Aways

  • Runs on the financial system paved the way to recession in 2008.
  • To avoid another crisis, authorities should focus on eliminating runs.
  • By creating a “run-free financial system,” countries can make sure that a crisis among private institutions doesn’t spill into the government domain.

About the Author

John H. Cochrane is a finance professor at the University of Chicago Booth School of Business.