The Political Origins of Banking Crises feat. Charles Calomiris

In economics and in finance, we're always trying to tease out timeless rules of how markets work. And yet, when we look out in the world, there's a lot of politics, there's a lot of history, there's a lot of particularity.  

Our guest today emphasizes the importance of narrative, individual case analysis, and historical exploration. 

Charlie Calomiris is Henry Kaufman Professor of Financial Institutions at Columbia Business School, Director of the Business School’s Program for Financial Studies Initiative on Finance and Growth in Emerging Markets, and a professor at Columbia’s School of International and Public Affairs. 

His research spans the areas of banking, corporate finance, financial history and monetary economics, and he co-authored the book “Fragile by Design: The Political Origins of Banking Crises and Scarce Credit” with Stephen Haber.

Today he chats with Greg about banking systems, Adam Smith, the medieval view of the corporation, bank bargains and the political origins of the subprime crisis.

Episode Quotes:

On our unstable economy

You know what I tell people, I said, you want to know why we have such an unstable economy? Look in the mirror, look in the mirror. You're the reason, you vote for these people and you do it on purpose because they've got you bamboozled.

US vs Canada

I would describe the U.S. as a Federalist constitution. And I would describe the Canadian constitution as an anti-federalist constitution.

On monopoly rents

The way that we like to get there is to say to people, look, If you're trying to create a banking system, you need people to actually contribute the capital for banks. You need the banks to be willing to lend the capital. You need people to contribute to deposits for banks too. And so when you go through those participation constraints, you quickly realize that there are two solutions.

Show Links:

Guest Profile:

• Faculty Profile at Columbia Business School
• Professional Profile at Cornerstone Research
• Speaker’s Profile at AAE Speakers
• Charles Calomiris on Twitter
• Charles Calomiris at the 79th International Atlantic Economic Conference in Milan, Italy.

His Work:

• Charles Calomiris on Google Scholar
• Fragile by Design: The Political Origins of Banking Crises and Scarce Credit
• China's Financial Transition at a Crossroads
• A Globalist Manifesto for Public Policy
• U.S. Bank Deregulation in Historical Perspective