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How Banks Are Watering Down Financial Reform Now 

January 16, 2014
Rana Foroohar, Time

Banks have won again. The recent news that the new international banking regulations (known wonkily as Basel III) have been watered down by the banking lobby to allow them to continue doing daily business with nearly as much borrowed money as in the past is a real disappointment.

As I’ve written in numerous stories, including my recent “How Wall Street Won” cover, much of the conversation these days around making the financial system safer centers around leverage, or the ability of banks to borrow more money than they can immediately repay. If there’s too little, banks can’t conduct their business and capital gets constrained. But if there’s too much (as there still is) there’s a high risk that the banks won’t be able to meet its obligations if they are called in. As is it, banks will still be able to keep doing business with roughly 96 percent borrowed money, when many reform minded economists and financial experts believe it should be more like 80 percent.

Read more: Time
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