Anil Kashyap, the Stevens Distinguished Service Professor of Economics and Finance at the University of Chicago Booth School of Business, discussed “Financial Stability and Monetary Policy?” (with Caspar Siegert)

Fear that failure of a large complex financial institution can cause severe damage to the economy has created a pervasive bailout mentality among policymakers in the United States. As a result the federal government has committed huge amounts of taxpayer dollars, intervened in a host of normally private–sector activities, and induced excessive risk‐taking by people expecting the bailout policy to continue. Americans are understandably angry about a policy which rescues the people who take risks and fail at the expense of everyone else. But how can we reduce the bailouts? As George Shultz puts it, “If clear and credible measures can be put into place that convince everybody that failure will be allowed, then the bailouts, and the expectations of bailouts, will recede and perhaps even disappear.” The purpose of this workshop is to propose, present, and debate such measures.