heir equivalence to a cap-and-trade proposal. My discussion has much in common with Kotlikoff (2010), Chalmley, Kotlikoff and Polemarchakis (2012), Admati and Hellwig (2012). It also builds on Cochrane (2010, 2011). The larger points in this essay build on Cochrane (2013b). 3 Electronic copy availabl

More simply, banks could be required to buy put options, giving them the right to issue new equity at predetermined prices. However, critics such as Admati and Hellwig (2012) point out, why bother? Why bother with the fig leaf that the convertible security is debt rather than equity or really an equity