Recovery before Reform
Whatever their intrinsic merits, none of the proposals for bank reform being debated nowadays addresses the global economy’s most immediate problem: undersupply, not oversupply, of credit. In other words, the challenge is to revive lending growth in full awareness that we must begin devising ways to rein it in.
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LONDON – The financial crisis that started in 2007 shrunk the world economy by 6% in two years, doubling unemployment. Its proximate cause was predatory bank lending, so people are naturally angry and want heads and bonuses to roll – a sentiment captured by the current worldwide protests against “Wall Street.”