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Courtney Irvin

I feel like you're seemingly overlooking one of your own observations - "if repeat business is important for a company’s profitability, and if customers are aware of when they are cheated or are the victims of other unethical behavior by companies, competition tends to eliminate corrupt companies" - unfortunately finance/banking is such a layered industry... This often has the effect of making it impossible for a customer to be aware of corrupt and unethical practices. In most cases, the typical consumer is a broker and a fund manager away from the actual operations of whatever financial vehicle they are investing in. This very fact likely contributes highly to unethical behavior since the bad actors remain essentially anonymous from the end-user.


Posner is correct in saying that competition drove banks to ever riskier behavior. That risky behavior did not necessarily consist of making riskier loans. The banks were all driven to use more and more leverage, and when mortgages proved to be riskier than thought, that proved disastrous. The Basel standards had classified mortgages as nearly as safe as sovereign debt.


Is the banking system more corrupt because of more regulation, or is it the other way around?

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