Economist Advocates Removing Risk Taking from the Banking Industry

BY Paul Solman  April 6, 2010 at 3:02 PM EST

Editor’s note: On the NewsHour tonight, leaders of the “Move Your Money” movement explain why they think Americans should move their money from large “too-big-to-fail” banks to small community institutions.

“I hope it sends a warning to the big banks that their sociopathic behavior is not acceptable any longer,” Move Your Money founder Rob Johnson says.

But in this Web extra, Boston University economist Larry Kotlikoff explains why he believes that putting your money in small banks brings no guarantees of reform — and why he is a proponent of “limited-purpose banking”, an idea that would remove much of the risk from the banking industry and is spelled out in his new book, “Jimmy Stewart is Dead.”

This entry is cross-posted on Paul Solman’s Business Desk blog.