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What Contract Theory Teaches Us about Regulating Banks

Wednesday, March 22, 2017 11:02
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Caterina Lepore, Caspar Siegert, and Quynh-Anh Vo at Bank Underground:

What can Nobel-winning contract theory teach us about regulating banks?: The 2016 Nobel Prize in economics has been awarded to Professors Oliver Hart and Bengt Holmström for their contributions to contract theory. The theory offers a wide range of real-life applications, from corporate governance to constitutional laws. And, as the post will hopefully convince you, contract theory is also helpful in regulating banks! To this end, we will unpack the outline of the theory and apply it to a number of real-world conundrums: How to pay banks’ chief executives and traders? How to fund a bank’s balance sheet? How to regulate banks?

What is Contract Theory? …


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  • did you really say “regulating banks”?? that’s amusing.. have you EVER heard of “THE CREDIT RIVER CASE”?? It’s the court case where a bank president admits, in court, under oath, that banks create money out of thin air!
    Would you care to show us where within the Constitution it grants the authority anyone but congress the power to coin money/create money? What, no such thing exists in the Constitution??
    How about you show us all a law that grants banks the authority to create money out of thin air?? What? no such law exists?

    Are you this stupid in person?? or are you really this IGNORANT?

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