Regulators causing bank failures

Wednesday, July 6, 2011
By Paul Martin

Returning banks to free market would strengthen economy

By Richard Rahn
The Washington Times

Beware Greeks bearing debt – or any other country that has too much of it. Despite ever-increasing government regulation of banks, which often are required to hold government debt as reserves, the systemic risk of a failure in the global financial system is growing rather than diminishing. There are solutions that require less, rather than more, regulation.
Some banks have been around for a couple of centuries or more, particularly in Switzerland, and yet they continue to thrive without government help. Only one Swiss bank out of 350 required state intervention in the financial crisis of the past few years. If you look at the big banks that have been in trouble or the banks that regulators and others worry about being in financial trouble, you will notice that virtually all of them have a corporate form of ownership and are heavily regulated. They also increasingly are being forced to be tax collectors for governments. Yet banks that are organized as general partnerships, such as Swiss private banks, where the owners of the banks have unlimited liability, have, in almost all cases, avoided failure or having to go to the government for a bailout.

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