MINNEAPOLIS — As the Federal Reserve Bank of Minneapolis continues its yearlong inquiry into how to end "too big to fail" in the banking system, academics and economists are starting to home in on a different but related question: How do we keep financial contagion from creating financial crises?

Speaking before the second symposium here on Monday, John Cochrane, senior fellow at the Hoover Institution at Stanford University, presented a proposal to restructure the banking system by taxing leverage and having banks move toward a 100% equity model — effectively replacing deposits and other short-term bank debt with equity, which is not as subject to runs.

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