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Great Debates: Unlimited Liability Banking

Bankers then and now:

Given the growth of unlimited liability banking in the past and the plethora of Americans living lives of quiet desperation in the present, I suspect that the risks of unlimited liability banking could in fact attract many, many small lenders whose initial capital may be little more than significant equity in their own home — if it were not the case that the whole industry is overshadowed by government sponsored mega-lenders.  After all, how many small businessmen and women in this country have already signed up to be personally liable for their business debts?  Putting all of one’s assets at risk to start a business is hardly an unknown or rare phenomenon in this country.

I think there are serious systemic risks to letting Citibank go under.  But then, as Instapundit likes to say, “Too big to fail is too big.”  Are there really irreplaceable economies of scale to financial institutions that large?

Posted in Business.

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