Ricardo Cabral_

Regulators Share Blame for the Financial Crisis

Thanks for the comments. In the text I identify what I believe are the causes of the crisis. I also point out the consequences, namely that several large banks were undercapitalized before the crisis started. Since losses have been far superior to capital raised, the banks conditions is, in some respects, worse now than before. Therefore, I believe that the current hope that capital raises will somehow still solve the problem is misguided. In addition to capital increases, bank liabilities need to be reduced.

There is, however, a difference between what should be done and what will be done. Given the evidence thus far, I do not believe banks liabilities will be reduced as I propose in my article.

Ricardo