a) What was the main rationale behind the separation of commercial and investment banking activities in the Glass-Steagall Act of 1933? Why was the act repealed?

b) Explain how regulations that require banks to finance a greater portion of their activities with equity capital might hinder economic growth. How might such regulations help economic growth?

c) A government can overcome the challenge of time consistency only if it is both able and willing to make credible commitments. With this in mind, how might the U.S. laws and procedures for bankruptcy affect the too-big-to-fail problem?

d) Explain why, in seeking to avoid financial crises, the govenment's role as regulator of the financial system does not imply it should protect most individual institutions from failure.