New Optimal Financial and Banking Regulation

Dear Dr. Bernanke,

The root cause of the current financial market meltdown is the power of predatory lenders to observe the security of their borrowers and then to short sell those securities to issue margin calls and to liquidate the borrowers’ windfall. This has first happened to leveraged households and then spread to nonbanks like investment banks funds. Specific ideas are proposed in the memorandum.

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