Professor Edward Kane:

Again, we are talking about what is a systemic crisis. To my mind, a systemic crisis would start well before one gets to the point at which all of the banks would have trouble raising funds. Again, it is the ignoring of the expansion of taxpayers' responsibilities until these responsibilities are sensed in the market to be so big that they test the system. The regulators then feel the problem is that there are too many institutions to deal with it in a reasonable period of time. We should track better what is going on and figure out a taxpayers' stake.

Another idea, which is not in my statement but features in some of my work, is that if we were to establish a formal trusteeship at the very big institutions that are going to be hard to fail, we would give that trusteeship the right to issue treasury stock, with "treasury" meaning "of the corporation". This would dilute shareholders and change very much the incentives of managers and shareholders to tolerate this kind of risk-taking. Risk-taking, as it now stands, is in the interests of shareholders until things go sour. When things go sour the smart shareholders should sell. I am not bragging about this because I did not sell all of my Bank of America stock. However, I sold one third of it at a price of around $50 per share. The price later fell to €3. In my case, the too-big-to-fail proposition worked out all right, although not great.