better bankers

We are delighted to introduce Professors Claire Hill and Richard Painter, along with the participants of our online symposium on Better Bankers, Better Banks:  Promoting Good Business Through Contractual Commitment (University of Chicago Press, 2015).  In the book Professors Hill and Painter trace the history of American banking to explain how we have arrived at what they term the “irresponsible banking” of today.  They argue that it is the failures of bankers themselves that causes banks to fail.  Their provocative solution is to hold bankers personally liable for bank failure.  As Larry Cunningham wrote on Concurring Opinions last year, Better Bankers, Better Banks offers a “fresh and compelling assessment of global financial stability.”

For roughly a half century after the Wall Street crash of 1929, the financial boom and bust cycle seemed to come to an end. Part of the reason was a change in the structure of banking; organizations that benefitted from federal deposit insurance had strict limits on the type of transactions in which they could engage and less regulated entities, such as investment banks, had to be owned as partnerships.   Another part of the reason is that the memory of the Great Depression restrained banking practices for decades after it occurred.   By the 1980s, however, those memories had faded, and a new era of high interest rates, greater international competition, and free market ideology encouraged deregulation of the financial section. The result contributed to the housing bubble and a series of scandals resulting in a new financial crisis from which we have yet to recover.   Few believe either that the government responses to date or the changes in banking culture the large banks have promised will eliminate the risk of another crisis. Yet, there is little agreement on the best ways to approach the risk.


Hill and Painter offer a straightforward solution: bring back an easily administered idea that worked. Require that those engaged in banking remain personally liable for their decisions. During the era in which investment banks could only be held in partnership form, partners could not easily buy and sell their interests. They had to be concerned about the long haul, and they jealously safeguarded their reputations and those of the companies they oversaw.   Once again making bankers personally liable for their actions will change the incentives that underlie banking, in an era in which transactions have become so complex that trying to anticipate each new abuse has become practically impossible.

To consider these and many other fascinating questions, we have invited a group of leading banking and corporate law scholars,  and of course, Professors Hill and Painter.

We look forward to a discussion on how to better our banks – and bankers.


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