Admati, Anat R., The Compelling Case for Stronger and More Effective Leverage Regulation in Banking (June 9, 2014). Journal of Legal Studies, Forthcoming; Rock Center for Corporate Governance at Stanford University Working Paper No. 159. Available for download at SSRN: http://ssrn.com/abstract=2344831 orhttp://dx.doi.org/10.2139/ssrn.2344831

“Society stands to benefit substantially if banks and other financial institutions were required to rely much more on money obtained by owners or shareholders (equity) thus reducing their leverage than current and proposed regulations allow. I outline the benefit of such reform and discuss why claims alluding to “costs,” made by the industry and others, including academics, are flawed. Without providing precise quantitative assessments, I outline steps that can be taken immediately to transition to a safer and healthier financial system that is less prone to crises and which can support the economy more consistently and create fewer distortions.”