Syndicate content

Add new comment

Submitted by Ivailo Izvorski on
The possible benefit from state-owned banks in crisis - that they may expand lending - comes at the massive cost of them in good times when they, inevitably, get captured and misallocate credit. It is also not clear whether a crisis that was caused by too much credit to households that cannot afford it - because of explicit and implicit government guarantees and policies - can be resolved by more lending to the same households. Free liquidity to banks during a liquidity crunch - yes; more credit to overly indebted households to avoid a workout?