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2018-04-20

To protect the economy from future mega-bank failures, much more work needs to be done.

Under the current plan, certain creditors are designated in advance to absorb a failed bank’s losses once the equity is wiped out. 

Those creditors’ debts are thus riskier, and should be more expensive to the bank than the debt that is not designated to be turned into equity. 

Yet the Fed economists conclude that, in the market, this is not the case. Why?


Mark Roe, professor at Harvard Law School, Project Syndicate 17 April


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