Darrell Duffie


On his book How Big Banks Fail and What to Do about It

Cover Interview of July 27, 2011


There are undoubtedly sources of future financial crises that experts do not even contemplate today.

But the failure mechanics I explain in this book do not depend on the cause of a financial crisis.  These mechanics are relevant as soon as suspicions arise over the ability of a systemically important bank to sustain itself.

My hope is that readers will take away a deeper understanding of the incentives at play in and around these firms, the core “plumbing” of the financial system, and some of the key points of fragility in its design.

It is possible that some of those responsible for making important related regulatory or risk-management decisions could draw some helpful insights from this book.  This was obviously one of my motives.  Another goal was to transfer this knowledge to graduate students—at Stanford and other universities.  Some of them will have pertinent leadership responsibilities in the future.

I also hope that some intellectually curious readers whose careers are not connected with financial markets, but are merely anxious to learn more about our financial system, will enjoy reading How Big Banks Fail.

© 2011 Darrell Duffie