This is the Cato Daily Podcast for Wednesday, October 28th, 2015.

I'm Caleb Brown.

The internal culture of mega banks drove many of the decisions that led to the financial crisis.

Edward Kane, a professor of finance at Boston College, argues that the implicit guarantee

of a taxpayer-funded bailout needs to carry a price along with it.

Until then, he argues, the structure of high finance in the United States will be doomed

to repeated crises.

What has been the culture of mega banks? I believe the culture is one of profit maximization, but the

unfortunate thing is that the profits do not include the subsidies that they can extract from

taxpayers by taking extreme and reckless risks and then that feeds into the culture of regulators,

which is to rescue them.

And we're talking about the very biggest banks,

the ones that have to be rescued,

the ones that are called too big to fail.

So it has a lot to do with what the expectation within the bank is given the kinds of risks

that they're going to take, or that they could be induced to accept.

Well, I liken it to reckless driving.

That if you see, sometimes driving here in the city especially,

you will see people weaving in and out of

way lanes at very high speed and they're causing a lot of danger to other people.

They're very confident that they will survive but you know at some point you see them you pass by them at a couple blocks later and they're in a crash and in traffic we've set up a system of laws and points and punishments that help to teach people not to drive that way.

And regulators, when they're engaged in their jobs, it's not necessarily clear that

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