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Tim Koors's avatar

I wait with bated breath for economists to discover the wheel and fire. They might even one day even advance so far as to discover time and distance but for that I will not be holding my breath.

Economists have this strange idea that mathematical rigor is the signature of science but I have some bad news for them: It ain't. Economics suffers from a bad case of physics envy.

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Dale Ponikvar's avatar

A couple of key elements driving the borrowers’ move to marketable securities from bank loans are not mentioned: loan covenants and bank regulation. Bank loans have traditionally had more covenants and a loan officer butting in on the borrower’s business. Borrowers hate that. And bank regulation almost by definition means that in many cases the borrower can’t use a bank.

Finally, without wanting to be nasty, marketable securities brought investment banks onto the playing field and their almost risk free ability to profit from placing securities left commercial banks, literally, holding the bag…empty.

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