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Ben Bernanke

Fixing banks will take a different kind of courage

In his new book, "The Courage to Act," Ben Bernanke makes a strong case that the U.S. Federal Reserve, under his leadership, acted as necessary in 2008 to pull the country back from the brink of another Great Depression. Unfortunately, he and the Fed also appear to have missed some important lessons from that terrible episode. Consider the excessive reliance on debt in banking. Bernanke recognizes the importance of equity capital in protecting the economy from financial shocks. Equity is money from investors who share in losses and have an incentive to monitor executives' behavior -- as opposed to depositors and secured creditors, who impose little discipline. Most...