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Simple, easy fix. Restrict banks from engaging in the trading or issuing of securities, in any form or fashion. And require investment banks to be partnerships and restrict the amount of leverage they are legally allowed to carry. Simply, easy to implement, and elegant.
Sure, trading screw up's will continue to happen but now the partners of the firm will be on the hook with their entire net worth instead of public shareholders and the taxpayer. Problem solved.
Back in the day, all investment banks were partnerships and banks were restricted from involvement in activities that were traditionally viewed as investment banking. Sometimes the old way is actually the right way.
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