Wildfires and bank crises have much in common.

In the Washington Post, June 12 2023. Jennifer K. Balch wrote:: Fire can be used as a tool to reduce the fuels that lead to more intense wildfires… Native Americans have managed fire with cultural burning for millennia.” “Learn, baby learn: Altering our approach to wildfires” 

Indeed, that goes for bank crises too. In May 2003, as an Executive Director at the World bank, during a workshop for bank regulators I argued:

“There is a thesis that holds that the old agricultural traditions of burning a little each year, thereby getting rid of some of the combustible materials, was much wiser than today’s no burning at all, that only allows for the buildup of more incendiary materials, thereby guaranteeing disaster and scorched earth, when fire finally breaks out, as it does, sooner or later. 

Therefore, a regulation that regulates less, but is more active and trigger-happy, and treats a bank failure as something normal, as it should be, could be a much more effective regulation. The avoidance of a crisis, by any means, might strangely lead us to the one and only bank, therefore setting us up for the mother of all moral hazards—just to proceed later to the mother of all bank crises.”