all these systems, but they are much more careful, have been much more careful. the europeans made a huge mistake, because we made a huge mistake. >> we just had a company go down in part because of bets on sovereign debtp. dr. lerrick. >> i echo simon's comments about the bazel rule. i would raise two points. first, there's one true law of economics. that was first enunciated by the governor of the bank of england in the 19th century. every regulation will be circumvented. when you start setting out very precise rules, you are setting in motion an entire system of people. certainly spending their lives thinking how to circumvent them. remember, regulators are always one crisis behind.

they're always thinking of that last crisis, they don't know where the next crisis is coming. they are paid far less, work far less hard. and are not as highly skilled as the people that are attempting to get around the regulations. you must keep in mind when you set out clear regulations, you have a problem. the second is, i was looking -- i saw an old photograph of a bank that had been closed back in the 1920s. but the front -- the window front was very interesting. in 19 -- before the federal reserve in the 1920s and '30s, on the front window of every bank it said capital, $10 million or $12 million or $5 million. now when you look at a bank it says fdic insured. that is a fundamental problem. you have a system where very few people pay attention to the capital of banks. simon raised that the levels are much higher in developing

countries, many emerging market countries. look at switzerland. switzerland is the developed country that has the greatest interest in preserving its banking system. they live off its banking system. they propose raising capital to 16% before anyone else. and probably will go higher in order to establish the absolute credibility of their banks in the world. and that's one of the key issues. capital is -- banking should be a boring business, it should not be a high flying business where you take risks, you trade, do you all these things, it's a boring business, very similar to a utility. they're supplying payments, checking, they're supplying loans to small businesses, this is not an exciting business. it's not a highly profitable business. it's a fundamental business for the economy. and the job of the government is to make sure that banks are not in danger. and that's why you should make

it a boring business. >> thank you very much. >> this was fascinating testimony. i'm new here, let me quick ask a question on the asian banks and what they did to solve their problem. when we passed dodd/frankp. i'm a great believer in not inventing the wheel. did we take a look at what the new asian banks put in place when we designed dodd/frank? does that make sense and would it make sense to do so? >> my impression as someone who followed it closely is that we were very taken with the exceptional nature of the united states. and there were various lessons we could draw from scandinavia. he hit the nail on the head. make banking boring. and the scandinavians have come

through this crisis in relatively good shape from a fiscal point of view, in part because they had had terrible problems with the banks in the 1990s. got completely out of control, just like emerging markets. and they cleaned them up and made them much more conservative and careful including much higher levels of capital. captions copyright national cable satellite corp. 2008 captioning performed by vitac