Paola Sapienza and Luigi Zingales
We have experienced the destruction wrought by the financial crisis. Now it's time to focus on the opportunities it brings. The first place to look is the site of the greatest destruction: the banking sector. While finance will remain a pillar of a well-functioning economy, it's unlikely that banking will survive for long in its current form. The current banking model is broken. Citigroup ( C - news - people ) has been on the verge of failing in three of the last four downturns: This is hardly a viable business model.
Even more important is that Americans are rapidly losing trust in their banks. A survey we conducted at the end of March showed that only 29% of Americans trusted banks, down from 34% three months earlier and 42% a year ago. Twenty percent of respondents felt that a bank had cheated or misled them in the previous 12 months, while 10% had withdrawn their FDIC-insured deposits and squirreled away the cash. The word "credit," speaking of telling etymologies, comes from the Latin credere, which means "to trust." Trust is essential in banking, and it's unlikely that banks can restore it. It's always difficult to regain trust; it's easier to start anew.
Stop Subsidizing The Street - Forbes.com
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