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Kashkari's Big Plan for the Banks

The best way to protect the financial system is also the simplest.
Off to a strong start.

Off to a strong start.

Photographer: Chris Goodney/Bloomberg

The new president of the Federal Reserve Bank of Minneapolis, Neel Kashkari, has gotten off to a bold start. In a speech this week, he warned that almost eight years after the financial crisis, the largest U.S. banks still pose a grave risk to taxpayers and the broader economy. Dealing with this problem, he said, will require a “transformational restructuring.”

He’s right that the financial system needs further reform, and it’s good that he’s open to radical proposals. But one thing should be clear at the outset: The best way to make banks safer is also the simplest. Require them to finance themselves with more capital and less debt.