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I think that's dubious. If management can make off with enough money prior to being wiped out, and it won't be clawed back, then there's still potentially a mor
by Rury 4y ago
I think that's dubious. If management can make off with enough money prior to being wiped out, and it won't be clawed back, then there's still potentially a moral hazard at hand. So what if we lose the bank! We'll make off with millions anyhow, by investing other people's money imprudently.
- skybrian 4y agoOkay, but how does punishing the depositors for management mistakes fix that? It definitely increases the damage, though. The shareholders lose it all if the bank goes bankrupt. They should have incentive enough to watch over management. If they don’t notice, how does it help for depositors to have their money at risk too?