Fragile by Design: A Historical Summary
This summary examines a sweeping study of the links between banks and political institutions by Calomiris and Haber, professors at Columbia and Stanford universities respectively. Their thesis states that the strengths and shortcomings of a banking system are the predictable consequences of political bargains, and those bargains are structured by the fundamental political institutions of societies; the subprime crisis was simply the latest in a very long string of American banking crises. What must be explained is why the United States has a banking system that is so persistently crisis prone. What is it about American political institutions that generates incentives for bankers and populists to search one another out and forge such powerful coalitions?