Instead, ‘ﬁscal dominance’ manifests itself through pressure on the central bank to use monetary policy to maintain the market value of government debt.” [10] If monetary policy gives in, ﬁscal policy might suddenly be left calling the shots.
Second, assuming that another goal of public policy is to limit the opportunities for banks to exploit the moral hazard incentives inherent to the safety net, what organizational form best ensures the safety and soundness of banks? The holding company organizational structure has a proven track record of helping to achieve both of these public policy goals.