Wednesday, September 15, 2010

Support your local lender

A group of central banks got together and came up with a new set of rules to “prevent another financial collapse without impeding the fragile economic recovery.”

The rules require that the banks hold more in reserves and keep a larger contingency buffer. That means that a bank that wants to lend as much as it is legally allowed to lend, can now lend less than it did before these rules. So, bank profit margins will go down. It apparently judged as a good thing to limit profits.

Another indication that there is something wrong here is that our First Dope supports these regulations. They are basically a mirror of the rules the US Fed put out during the summer. Those are the rules that completely ignored Freddie Mac and Fannie Mae – the agencies that were responsible for the collapse in the first place

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