Effective Financial Reform

Published: November 29, 2017

Financial crises come from bank runs. An innovative way to prevent bank runs is to use equity-financed banking. Equity-financed banks would replace debt with equity as their method of financing and back up all deposits with liquid assets like Treasury bonds. Since it would not hold any debt, bank runs would become a thing of the past.

Discussion Questions

1. Are financial crises inevitable?
2. How can equity-financed banking prevent a future financial crisis?
3. What makes equity-financed banking more secure?

Additional Resources

• For more, read  John Cochrane’s chapter “A Blueprint for Effective Financial Reform” in Blueprint for America.
• You can find the rest of Blueprint for America here.
•  For more on equity-financed banking, click here.
• Read John Cochrane blog post “Toward a run-free financial system,” available here.