Federal Reserve's Kashkari Releases Plan
To End "Too Big To Fail",
Compares Banks To Terrorists"One useful analogy that helps highlight the trade-off of costs and benefits is the risk of terrorism. Intuitively, the public understands that we as a society cannot eliminate all risk of a future terrorist attack. It is simply impossible to make that risk zero. And the public intuitively understands that increased physical safety isn’t free. There are costs associated with hiring additional law enforcement officers, for example, or installing more metal detectors. Since we cannot eliminate all risk, we have to decide how much safety we want and what price we are willing to pay for that safety. The same is true for financial crises. We cannot make the risk zero, and safety isn’t free. Regulations can make the financial system safer, but they come with costs of potentially slower economic growth. Ultimately, the public has to decide how much safety they want in order to protect society from future financial crises and what price they are willing to pay for that safety."