Investors might choose other places for their excess cash, like banks.

Its member organizations are the G 20 s central banks and top regulatory agencies.

If faced with such losses, banks might choose to protect their reputations by using official funds for repayment, transferring the risk onto their balance sheets.

Such large banks are needed because small players alone cannot make a market.

But Americans blame irresponsible banks, while Europeans blame irresponsible southern countries like Greece.

Bank regulation, like lending, was once decentralized and judgment based.

Foreign banks could never hope to achieve such comprehensive coverage without a local partner.

The first is the failure of central banks to adopt a rule like nominal GDP targeting or its equivalent.

Central banks like the Fed and the Bank of England seem to have forgotten that history.

In response, investment banks branched into new businesses like originating and distributing complex derivative securities.

I think we need financial and economic experts to study such a phenomenon, and its effect on banks, and the country's economy as a whole.

Many European banks may not have understood this, yet they still shied away from revealing these dubious investments on their balance sheets.

Like the Ertebølle culture, the settlements were concentrated near water, in this case creeks, riverdunes and bogs along post glacial banks of rivers like the Overijsselse Vecht.

Such monetary systems can succeed only as long as the central bank can credibly commit to keeping inflation under control.

But such criticism ignores the problems faced by banks that did not use or deal in complex financial products.

The chiefs of major European banks such as Deutsche Bank, Barclays, and Société Générale were naturally also unanimous in their hostility.

Such tactics, in which banks are nudged, not coerced, into investing in government debt, constitute soft financial repression.

The biggest banks now account for an even larger share of the financial sector after benefiting from a government rescue, while efforts like the Dodd Frank Act to legislate more constraints on banks have been lobbied into shadows of their original selves.

Big banks ability to extort such an arrangement stems from an implicit threat the financial sector and with it the economy s payment system would collapse if a systemically important bank were ever pushed into insolvency.

The implication is that emerging markets, while encouraging foreign banks entry, should at the same time strictly regulate such banks local lending practices.

The effects of banks hijacking of national payment systems to service only the modern economy are compounded by the exclusive agreements that banks and money transfer companies such as Western Union have signed with most African countries.

As long as Greece paid these high rates, Cypriot banks could pay their depositors attractive rates, such as 4.5 , and thrive.

The US is big enough to handle behemoths like Bank of America or Citigroup.

How to Bail out Good Banks and Let Bad Banks Fail

They will focus initially on sectors such as credit cards but could develop other joint ventures.

In fact, the Federal Reserve, the Bank of England, and the Bank of Japan are doing just that under the name of quantitative easing.

The United States Federal Reserve, the European Central Bank, and the Bank of England are particularly exposed.

After all, deposits from the small town banks were running off to big banks in money centers like New York, Chicago, and Los Angeles.

Central banks in emerging market countries like Brazil, China, India, Indonesia, Peru, Thailand, and South Korea are providing good examples to follow.

In Spain, banks have historically issued 30 year mortgages whose interest rates are indexed to interbank rates such as Euribor, with a small spread (often less than 100 basis points) fixed for the lifetime of the mortgage.

For example, we had no financial crises when central banks instructed commercial banks to limit their lending to particular economic sectors that they believed were overheating, such as real estate or consumer loans.

In the future, banks should consider basing bonus compensation on broader measures, such as earnings before any payments made to bondholders.

More financial regulatory reform, such as coordination of any taxes or penalties that members want to apply to risk taking banks

The debate has been most intense in the United States, where the refrain that the Constitution is not a suicide pact and that national security can justify extraordinary measures is heard repeatedly.

Indeed, it seems that only retiring central bankers, such as Mervyn King of the Bank of England, are willing to raise concerns publicly.

Banks loaded up on the relatively high yield debt of countries like Greece because they had to set aside very little capital.

When banks stopped providing short term liquidity to other banks and industrial companies, central banks filled the gap.

Furthermore, the PBC uses unconventional instruments from time to time, such as credit ceilings or credit quotas imposed on commercial banks.

If we can afford that much to save banks, we can afford something more to save the planet.

Such a requirement would impose costs on universal banks by constraining their ability to transfer capital within the group.

If such banks fail, they are resolved by the Federal Deposit Insurance Corporation (FDIC) in the normal fashion, and this has always been the market s ex ante expectation.

But the former is usually implicit and uncertain, making it vulnerable to default. If faced with such losses, banks might choose to protect their reputations by using official funds for repayment, transferring the risk onto their balance sheets.

In contrast to lending activities, banks commitment to foreign markets has remained virtually unaffected with respect to purely intermediary activities such as investment banking and asset management.

And, as debt burdens become heavier, public spending must be cut further and taxes increased to service the government s debt and that of its wards, like the banks.

Investment banks like Bear Stearns and Lehman Brothers got into trouble because they had too little equity capital far less than 10 .