I am not surprised by Bob Cull findings, and many others in the past, about the lack of a clear correlation between the presence of state financial institutions and economic development in emerging economies. Since most of the state financial institutions have not been properly managed, it would be difficult to find different results. However, if we keep looking at the past we will not move forward. The question that we need to answer is whether the root of the problem is structural to the ownership of the bank or it is more related to the lack of a proper hedging design for ownership structure. Back in the 80s, when Professor Calomiris began writing about these issues, our knowledge of corporate governance, risk management, and the boundaries of the financial systems were less clear. Fortunately for some of us (but not necessarily for Professor Calomiris) the corporate governance theory and risk management practices have evolved substantially, and hedging the shareholder risk it is something that it is possible to do and there are successful cases to show. Some other participants in this blog have mentioned the successful case of Banco del Estado de Chile, but it keep the sentiment that Chile is different and there are cultural issues that explain the behavior. I have studied the case Banco del Estado in detail, and I have found nothing cultural behind its success. It is purely an issue of hedging the shareholder’s risk and having the bank properly supervised by a competent banking supervisor. The experience of other successful banks shows that there are multiple ways of approaching this problem. Some of the preliminary lessons that we are getting from the recent crisis is that privatively owned banks do not necessarily bring economies into sustainable development either. The emergence of state financial institutions, together with other public support programs such as guarantee lines, emerges as an alternative when governments look for alternatives for protecting the most vulnerable sectors of the economy in the presence of economic cycles. Highlighting the risks of public financial institutions, and providing a consistent framework on how to mitigate those risks are the right policy advice that a mature institution like the World Bank should provide to its client countries. It would be short sighted and irresponsible not to apply the knowledge that we have gain in the past 20 years.