A Theory of How and Why Central-Bank Culture Supports Predatory Risk-Taking at Megabanks

38 Pages Posted: 17 Apr 2015 Last revised: 15 Dec 2015

See all articles by Edward J. Kane

Edward J. Kane

Boston College - Department of Finance; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: December 14, 2015

Abstract

This paper applies Schein’s model of organizational culture to financial firms and their prudential regulators. It identifies a series of hard-to-change cultural norms and assumptions that support go-for-broke risk-taking by megabanks that meets the every-day definition of theft. The problem is not to find new ways to constrain this behavior, but to change the norms that support it by establishing that managers of megabanks owe duties of loyalty, competence, and care directly to taxpayers.

Keywords: regulatory culture, safety net, financial reform, financial crisis

JEL Classification: G18, G20, E44

Suggested Citation

Kane, Edward J., A Theory of How and Why Central-Bank Culture Supports Predatory Risk-Taking at Megabanks (December 14, 2015). Available at SSRN: https://ssrn.com/abstract=2594923 or http://dx.doi.org/10.2139/ssrn.2594923

Edward J. Kane (Contact Author)

Boston College - Department of Finance ( email )

Fulton Hall
Chestnut Hill, MA 02467
United States
520-299-5066 (Phone)
617-552-0431 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
105
Abstract Views
1,157
Rank
235,543
PlumX Metrics