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March 30, 2012

Fallacies, Irrelevant Facts, and Myths in the Discussion of Capital Regulation: Why Bank Equity is Not Expensive

This 2011 study dismantles the myth that bank equity is expensive and entails significant social costs. The study contends that the arguments bank executives have put forward against holding more equity are often “fallacious, irrelevant, or very weak.” The authors argue that requiring banks to hold more equity will result in greater social benefits and in minimal costs.

The report was authored by Anat Admati, Peter DeMarzo, and Paul Pfleiderer of Stanford University’s Graduate School of Business and Martin Hellwig of Max Planck Institute for Research on Collective Goods in Bonn, Germany.

Read the full report here 



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