Apr 242009
Finger of blame points to shadow banking’s implosion Gillian Tett, Financial Times. Makes the oft forgotten point that what has imploded is securitization, not so much bank lending. But I still think she misses the point a tad. Securitization ex government guarantees appears not to be coming back any time soon ex reform, which also does not appear to be a big priority. And so that does mean more lending is needed, even if you accept the proposition that less lending ought to be extended (as in credit standards need to be tightened). Put more simply, if securiitzation is broken, or only to come back as a pale imitation of its former self, banks will have to have bigger balance sheets in aggregate.
