hanumanhojo

From Crunch to Catatonia

Interest rates should reflect risk and proper return for that risk, not some mystical number that the Fed decides to set the short rate to. That's how banking is done in the real world.

Thus, interest rates have risen. Many companies and individuals are overleveraged, thus they are less likely to get a loan, as things should be.

If the government really wanted credit to be extended more, they should have taken the bailout money and given it to the healthy banks. Instead, the money went to filling potholes caused by shoddy lending at the weak banks.

Until we start rewarding the prudent instead of the weak and foolish, the "credit crunch" will continue.