The credit crisis has been a systemic failure. Though the press primarily blames the bankers for our problems, the failure was not that of one single set of agents.
In this paper, the authors set out some of what went wrong, and how we can develop a framework of policy and institutions needed to ensure a vibrant and stable financial system in the future. This will require new thinking about the type of institutions on which a successful modern financial economy depends. In particular, the paper focuses on the relationship between each of these institutions and how it is possible to get them to work in a way that will support open and effective capital markets.
The paper's aim is not to lay out a detailed framework for bank solvency or accounting regulation though we will touch on many examples of reform. Rather, it is to try to clarify the principles on which any responsible Bretton Woods-style remaking of the market system will rest, and how these might be applied to the banks and other institutions where finance is raised to keep the economy going.
This paper is part of our Tomorrow's Capitalism programme.
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