The 2008 financial crisis upended that faith. She turned her gaze to the industry at the center of the crisis: banking.<\/p>\n<\/div>\n
Admati made waves on the national financial reform scene in 2013 with the book \u201cThe Bankers\u2019 New Clothes: What\u2019s Wrong With Banking and What to Do About It,\u201d co-authored with economist and banking expert Martin Hellwig.<\/p>\n<\/div>\n
Here\u2019s an excerpt of a discussion with Admati:<\/p>\n<\/div>\n
Why did you write \u201cThe Bankers\u2019 New Clothes,\u201d a book for the general public and not strictly for scholars?<\/p>\n<\/div>\n
We thought we had to. There was, I thought, a certain lack of engagement on the part of many academics, and it was disturbing to me that there was not enough serious discussion about what was going on.<\/p>\n<\/div>\n
I was not a banking expert, but after studying it, I found that a lot of policymakers and people commenting on it didn\u2019t actually know what they were saying or were saying wrong things or misleading things.<\/p>\n<\/div>\n
There seemed to be, to take a charitable interpretation, that there were blind spots or confusion or, the most cynical interpretation, there was sort of willful blindness.<\/p>\n<\/div>\n
How did you get so involved in Washington financial policy circles?<\/p>\n<\/div>\n
From the beginning, I tried very hard to engage with anybody in Washington who would engage with me. It started by being appointed by Sheila Bair (then the FDIC chairwoman) to a committee in the spring of 2011, which just allowed me into the room at all.<\/p>\n<\/div>\n
So, what\u2019s wrong with banking?<\/p>\n<\/div>\n
What\u2019s wrong with banking is that a lot of people are able to take risks and not be fully responsible and accountable for those actions.<\/p>\n<\/div>\n
People need to understand that the biggest banks are really, really big, by any measure. Just how much is a trillion? It\u2019s an enormous number. They are larger than just about any corporation, so it\u2019s not just big. It\u2019s really very, very big.<\/p>\n<\/div>\n
It\u2019s also the complexity and sort of breathless scope of what they do and just how much of it is opaque. It remains incredibly fragile as a system.<\/p>\n<\/div>\n
Capital requirements, boiled down, amount to a few percentage points of a bank\u2019s total assets. What\u2019s the right ratio?<\/p>\n<\/div>\n
Current requirements are ridiculous by any normal standards. A supposedly \u201charsh\u201d regulation would be 5 percent of the total. Corporations just never ever live like that.<\/p>\n<\/div>\n
I talk about 20 percent-30 percent of assets, but what\u2019s really complicated is how you measure assets. The way assets are measured now pretends to be scientific, but the rules are designed in a flawed way. I want simpler measures and for capital to be 20 percent-30 percent of the total.<\/p>\n
Dean Starkman writes: \u00a0Anat R. Admati, a professor of finance and economics at Stanford\u2019s business school, is an unlikely player in Washington\u2019s financial reform scene. The Israeli-born economist arrived at Stanford in 1983 with an interest in mainstream financial issues … Continue reading ![\"Anat](\"http:\/\/www.w-t-w.org\/en\/wp-content\/uploads\/2015\/09\/Anat-Admati-300x221.jpg\")
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