Here is the best and the worst of macro-prudential bank regulation. Guess which one we got?

The best macro-prudential bank regulation that exists is: “Do not interfere in their allocation of credit but, make sure banks go belly-up as soon as they find themselves belly-up” 

Quite the opposite of today which is: “Let’s interfere as much as possible, like for instance with our portfolio invariant credit-risk weighted capital requirements for banks,” which is a potent growth hormone of too big to fail banks, and also potently distorts the allocation of bank credit, and then, with QEs and other concoctions: "Let's cover up fast we can how stupid we as regulators have been”

In 2003, as an Executive Director of the World Bank I told regulators that had gathered to talk about Basel II the following: "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."