A con artist has a great idea: theyll open a bank without investing any capital and lend
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A con artist has a great idea: theyʼll open a bank without investing any capital and lend all the deposits at high interest rates to real estate developers. If the real estate market booms, the loans will be repaid and theyʼll make high profits. If the real estate market goes bust, the loans wonʼt be repaid and the bank will fail — but they will not lose any of their own wealth. How would modern bank regulation frustrate this scheme?
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Modern bank regulation includes various measures designed to prevent scenarios like the one described with the con artist opening a bank without any c...View the full answer
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