Trading in the "Fever of Boom"
Letter to the Editor

Sir, Many thanks for John Kay's excellent column "Our banks are beyond the control of mere mortals" (July 8). He is so right that it is not a matter of stupidity or incompetence. As Walter Bagehot said, it is "the ablest and cleverest the most" who in the fever of the boom "trade far above their means".

I believe the explanation is at bottom simple: leverage. No one, no matter how able or clever, can run an organisation taking serious risks that is also leveraged up to 20 or 30 or more times equity, without crashing from time to time.

There is just too little margin for the inevitable errors and unpleasant surprises in a dangerous and uncertain world.

Alex J. Pollock is a resident fellow at AEI.

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Alex J.
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Wednesday, August 27, 2014 | 3:00 p.m. – 4:15 p.m.
Teacher quality 2.0: Toward a new era in education reform

Please join AEI for a conversation among several contributors to the new volume “Teacher Quality 2.0: Toward a New Era in Education Reform” (Harvard Education Press, 2014), edited by Frederick M. Hess and Michael Q. McShane. Panelists will discuss the intersection of teacher-quality policy and innovation, exploring roadblocks and possibilities.

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