Randomness (r_ness) wrote,
Randomness
r_ness

Matt Levine, describing banks in a way I think is generalizable to other large organizations:
It strikes me as a mistake to view banks as unitary entities that either internalize or externalize risk. A bank is not a group of managers and shareholders and creditors who get together and decide jointly and sensibly how much risk they each should take (and how much they can offload onto the rest of the economy). A bank is a system of different groups -- managers and employees and shareholders and creditors and regulators -- who sit around separately deciding how much risk they can offload onto each other, without the others noticing. "The rest of the economy" is just another outlet for that risk.
Tags: money
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