"It manifests itself in these instruments because they allow the banks to use all kinds of tricks to borrow more and to hide all the risk in borrowing that happens. And so they can manipulate the regulation and they can actually be riskier than they appear, and all of this is just living on the edge and not being prepared enough, with your own money, indeed, to various eventualities, to what might happen."
On new regulations and banks' resistance to carrying more equity
"So the requirements now, which the regulators will tell you are so tough, actually still allow the banks to use borrowed money for 97 percent of their investment and have just 3 percent equity, so even if it's a little bit, just a little bit more of a buffer, it's still not a healthy place to be. ...
"If they find that they cannot live with much more equity, then we have to wonder about their business model and the viability of having such a banking system that possibly is quite bloated and is distorting the rest of the economy. If the only way they can live is on subsidized borrowing, then we have to be concerned about why that is."
On what would make the banking system more stable
“ The banks that cannot raise new equity are showing us a great weakness. ... The time to take care of that is now, and not in a crisis.