Douglas Diamond, Anil Kashyap, and Raghuram Rajan
Freakanomics Blog – February 12, 2009
Timothy Geithner has announced his intention of making a full-scale attack on the nation’s banking problems.
Clearly, the objective of making banks willing to lend again — with them paying due, but not excessive, attention to risks — is the right one. To achieve this, not only do banks have to be confident about their own financial health, they have to feel that there are no more pennies waiting to drop and that the system is stable enough that asset prices will not fall significantly, so that they can start locking their money up in term loans.
