Politics & Power Quote by Arthur Laffer

Laffer’s tell is the double “I mean”: a rhetorical throat-clearing that tries to smuggle an ideological conclusion through the front door of consensus. He starts with a near-unassailable premise - “everyone agrees” stress tests are good - then pivots to the real aim: redefining who gets to enforce reality. The move is classic small-government persuasion. First, claim the center (“that’s clear”), then relocate the responsibility to private actors, as if the existence of broad agreement automatically proves regulation unnecessary.

The subtext is less about stress tests than about legitimacy. Stress tests are not just a technical exercise; they’re a public assertion that bank failure is a social event, not a private mishap. Laffer wants the benefits of reassurance (markets and depositors like hearing “we checked”) without conceding the authority that makes the reassurance credible. “They should worry about their own capital” assumes incentives line up cleanly: that banks will accurately model their risk, resist short-term profit pressures, and voluntarily absorb the cost of prudence even when competitors don’t.

Context matters: post-2008, stress tests became a signature tool of modern financial governance precisely because self-policing failed spectacularly. In good times, the private sector’s definition of “adequate capital” has a way of shrinking to whatever keeps returns high and shareholders calm. Laffer’s intent is to frame government oversight as an unnecessary overreach rather than a response to structural moral hazard - the reality that banks can privatize gains while externalizing losses. The quote works by appealing to common sense while quietly asking you to forget recent history.