It is interesting that economists and politicians make the same mistake again and again, the magic word is now SiFi - or systemically important financial institution - which you can probably translate to systemically relevant financial institution.
It's amazing, scientists and politicians to hold on in spite of better knowledge on a concept that has proven to be wrong. As I at one of my last 5stars lectures and had stated in detail in my book, is the faith that was invented in systemic importance of the rating agencies. These are assumed to economic theory that financial institutions give when either are so large and significant that they can not go under. This belief is held as "too big to fail" concept in the thinking of scientists and politicians feed. Unfortunately it is not only wrong but also dangerous and should be relegated to the realm of superstition.
As I made clear in my book, is one reason why we have slipped into this crisis, the wrong assumption, one would save big banks by the taxpayers.
is unfortunately just the opposite. To the financial system to keep upright, you should really send the services in an orderly bankruptcy procedure and only compensate savers for their deposits, but not the owners and contractors for their risky trades. Only then can an economy sustainable recovery from a tsunami.
Unfortunately, this approach is not very popular and therefore not political feasible. Just like the old players easy money sought, the politicians are quick to voice out. But why the Basel committee is also in the same line and Sifis not relegated to the realm of fiction, is to me incomprehensible.
