A Theory of How and Why Central-Bank Culture Supports Predatory Risk-Taking at Megabanks


This paper applies Schein’s model of organizational culture to financial firms and their prudential regulators. It identifies a series of hard-to-change cultural norms and assumptions that support go-for-broke risk-taking by megabanks that meets the everyday definition of theft. The problem is not to find new ways to constrain this behavior, but to change the norms that support it by establishing that managers of megabanks owe duties of loyalty, competence, and care directly to taxpayers.

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  1. 1.

    As Schein explains (2010, p. xii), these methods are highly personal. They rely on close observation, focused inquiry, and critical feedback, something of which I can gratefully say I have had a great deal. The credibility of the inferences derived is supported at best by a replication-like test of whether it seems reasonable to believe that others would arrive at similar insights if they worked through the same process.

  2. 2.

    See, e.g., Beim (2009), Bernstein (2014a and b), and Glass (2014).

  3. 3.

    For example, failing to emphasize the importance of these additional battlelines limits the value of Ho’s insightful career-based research (2009).

  4. 4.

    In the words of Andrew Jackson [quoted in Todd (2002, p. 158)]: “In the full enjoyment of . . . the fruits of superior industry, economy, and virtue, every man is equally entitled to protection by law; but when the laws undertake to add to these natural and just advantages artificial distinctions to grant titles, gratuities, and exclusive privileges to make the rich richer and the potent more powerful, the humble members of society—the farmers, mechanics, and laborers—who have neither the time nor the means of securing like favors to themselves, have a right to complain of the injustice of government (1832).”


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Correspondence to Edward J. Kane.

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Kane, E.J. A Theory of How and Why Central-Bank Culture Supports Predatory Risk-Taking at Megabanks. Atl Econ J 44, 51–71 (2016). https://doi.org/10.1007/s11293-016-9482-x

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  • Too-big-to-fail
  • Financial regulation
  • Financial crisis
  • Regulatory culture
  • Financial stability


  • G20