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Anat Admati ’83PhD:
still too big too fail?

A “quixotic” campaign to make banks “more stodgy and less profitable” is finally gaining the attention of President Barack Obama and a Senate banking subcommittee, the New York Times reports. That makes the campaign’s leader, Stanford finance professor Anat Admati ’83PhD, possibly even less popular with bankers than before.

In an August 10 profile headlined “When She Talks, Banks Shudder,” the Times characterizes the “nearly unanimous” industry view of Admati, who is coauthor of The Bankers’ New Clothes: What’s Wrong With Banking and What to Do About It: “Her ideas are wildly impractical, bad for the American economy and not to be taken seriously.”

Admati’s main idea is that, despite legal changes after the 2008 financial crisis, banks still rely too much on borrowed money, which they spend as though it is, well, other people’s money. She calls on regulators to increase drastically the percentage of equity that banks must hold.

“My comparison is to speed limits,” she tells the Times. “Basically what we have here is the market has decided nobody else should be driving faster than 70 miles an hour and these are the biggest trucks with the most explosive cargo and they are driving at almost 100 miles an hour.”

“I cannot think of a sillier approach to the problem than that suggested by Ms Admati,” responds the Daily Telegraph’s assistant editor. Bloomberg View columnist Matt Levine ’04JD dismisses the interview as “vague blather about speed-limit metaphors.”

Admati is undeterred. On Twitter this week, someone posted a video with the message, “Keep calm and listen to Anat Admati at TEDxStanford.” Admati retweeted it, adding: “and then help me scream!”


The Yale Alumni Magazine is published by Yale Alumni Publications Inc., an alumni-based nonprofit that is not run by Yale University. Its content does not necessarily reflect the views of the university administration.

Filed under Anat Admati, banking
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