The necessary steps are as follows:
- The USA must finally participate in international agreements on the harmonisation of banking supervision. These agreements can be based on the Basel-II system, which must be under government control.
- Europe needs a common system of financial supervision. Every state must pay for the losses of its own banks.
- Investment banks, hedge funds and private equity firms must be subjected to the same rules as commercial banks.
- Personal liability limitations for mortgages and other real-estate loans must be lifted in the US and wherever else they exist.
- Conduits and other constructs for the shifting of investment banking business from the bank balance sheets should be limited in such a way that the risks that the banks take on are transparent in the bank balance sheets.
Free market advocates that argue against these remedies, without which a market economy cannot survive, confuse the market economy with anarchy. The market economy can only function when it is subjected to traffic regulations. Civil codes in many countries are full of rules that limit private contracts. Only a portion of the contracts that an uncontrolled market economy would develop is allowed, and because of this the system functions. Europe and the world need stricter rules for financial traffic. Such rules do not constitute a systemic break. They are vital for the functioning of the financial capital markets.
we are all this bear, we need to turn much more to cooperation rather than competition for future prosperity