Quote:
Originally Posted by Danijam
But is this strategy going to work out well for the banks? Seems like a pretty short term way of thinking. Maybe the people who make these decisions are on the verge of retirement, so they want their big bonuses now and don't care what happens in the long term.
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Not really, what Clark was explaining is that in the ultra competative world of banking no one who starts the process of being tighter on lending would be there long term as they would be carved up short term by the other banks. From their point of view they have to be competative on lending in the short term and not be the one bank that fails long term before the government bails out the banking system.
Traditionally I was deeply ideologically right wing, rugged individualism and what have you. I always thought that if everyone looked out for #1, the net effect would be the invisable hand that drives the economy. Well the last few years have highlighted to me that that theory works very well, but only in instances where the vast majority are actually competent in their struggles to look out for #1. Turns out that too many people are idiots and incapable of making financial decisions for their own benefit. Therefore the government seriously has to handcuff their ability to shoot themselves in the foot, because when everyone does it en masse at the same time it cripples even the people that made the right moves. Bring on 10% down and 25 years!