A Shot of Money

Bankers accept that, in the long run, the theorem might hold. But they argue that it will take time, especially given recent events, to persuade investors that banks are genuinely safer, and that their shares should be thought of as closer to utility stocks, yielding a lower return. Indeed, Franco Modigliani also argued that investors have a ?preferred habitat,? and that coaxing them out of it carries some cost. That does not bode well for banks, which have been a very poor investment in the last few years. Moreover, the banks assume that they will need to hold more capital than regulators ostensibly require in order to maintain a margin of safety.

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