This assignment is meant to encourage students to take a critical look on one of the most important debates in current economic policy – the debate on financial regulation. You will read a paper (14 pages)  on financial reform and prepare a critical review of the paper: Myerson. Your review should be a short essay (750-1000 words). The review may contain discussion of any points in the paper that you think are important. However, make sure you include discussion of the following questions:

(1) What is/are the major incentive problems in the current financial system that the author emphasizes?

(2) What are the arguments in favor of increasing the banks required equity?

(3) What are the arguments against increasing the banks required equity?

(4) Would you agree/disagree with the suggestion to increase the banks required equity? Why?

(5) What are the political challenges in implementing the financial reform advocated by the author?

(6) Why did the first Basel standard  weigh assets according their riskiness? What was the problem with implementing such a rule?


Feel free to read other materials that you may think are relevant to your essay. Here is a New York Times article (from 2014) reporting rules enacted in 2014 (to take effect in 2018) in line of what the author suggests: http://dealbook.nytimes.com/2014/04/08/regulators-set-to-approve-new-capital-rule/?smid=pl-share&_r=0