Insurance against financial fear

(PhysOrg.com) -- Just one year ago, a worldwide panic was unfolding: Financial markets froze after the collapse of the investment bank Lehman Brothers, leaving businesses without lenders as the economy drastically slowed. How can we stave off such fear-enhanced episodes in the future? Ricardo Caballero, MIT's Ford International Professor of Economics, offers a distinctive solution: Government-issued investment insurance for banks.

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