Why are banking systems unstable in so many countries–but not in others? The United States has had twelve systemic banking crises since 1840, while Canada has had none. The banking systems of Mexico and Brazil have not only been crisis prone but have provided miniscule amounts of credit to business enterprises and households. Analyzing the political and banking history of the United Kingdom, the United States, Canada, Mexico, and Brazil through several centuries, Fragile by Designdemonstrates that chronic banking crises and scarce credit are not accidents due to unforeseen circumstances. Rather, these fluctuations result from the complex bargains made between politicians, bankers, bank shareholders, depositors, debtors, and taxpayers. The well-being of banking systems depends on the abilities of political institutions to balance and limit how coalitions of these various groups influence government regulations.
Fragile by Design is a revealing exploration of the ways that politics inevitably intrudes into bank regulation. Charles Calomiris and Stephen Haber combine political history and economics to examine how coalitions of politicians, bankers, and other interest groups form, why some endure while others are undermined, and how they generate policies that determine who gets to be a banker, who has access to credit, and who pays for bank bailouts and rescues.
“Brilliant. . . . [I]f you are looking for a rich history of banking over the last couple of centuries and the role played by politics in that evolution, there is no better study. It deserves to become a classic.”–Liaquat Ahamed, New York Times Book Review
“Business economists Calomiris and Haber explain how imperfectly politics and commercial banks intersect, and the consequences for the rest of us. . . . This learned inquiry deserves ample attention from scholars, regulators, and bankers themselves.”–Publishers Weekly