Professor Edward Kane:

It has its costs as well. Clearing up the accounting for the taxpayer would be more powerful in changing incentives.

Every institution would want to get as close to the maximum as it could since it would be harder to fail. If one tried to ensure that no bank became more than a small bank, one would be giving up lots of economies of scale or scope that might be very good for society as a whole. There is always a trade off. I do not see that there really is a trade off in what I am proposing. I am just saying let us recognise that the taxpayers will bail people out, that they are providing loss absorbing equity at the key moments of a life of a firm. They are equity holders and are being treated badly compared to explicit shareholders.