Lending Information 4 You

mhb_valentine asked:


Well, during the current credit crisis, lending on the interbank market nearly came to a halt because Banks did not trust lending to each other.

So can someone use information economics to improve my understanding of what happened?

We’ve seen a possible solution to the problem is having the government provide guarantees for loans in the interbank market. But what are the limits of this approach, again, in the light of information economics?

Hank Mardukas asked:


Is reckless lending practices brought on by government pressure not what got us in a huge mess?

SALT asked:


The handing over of electronic account without the real cash being in place allows the banks to trade contracts such as insurance, and mortgage. If the bankers or lenders were to be regulated to such extent that the borrower were to be forwarded the loan only from the lender’s own reserve than it would be such that ‘no reserve, no lending, no crisis’.

Pale Rider asked:


If you can’t get a construction loan, you can’t hire construction workers. If you can’t get a car loan, then you can’t buy a car, If you can’t get a home loan, you can’t buy a new house. If you can’t get a business loan, forget about the American dream.We gave the banks 350 Billion already and they are still not lending it out. Where’s the money? All the other little theories about the economy are horseshit.

AAGI asked:


want information about latest “stimulus”: who wrote it and sponsors, how much will go to businesses to hire/rehire workers, how much will go to banks to lend to regular people.
Who sponsored these “junk” and pork components of it: money to remodel the Smithsonian, money for more aids “research”, money to NASA to study “global warming”. Seems like business as usual to me, less than 2 weeks after the inauguration. Who came up with this trash and waste of taxpayers money?

Jake asked:


I’ve read that the major problem that has caused this crisis is because banks aren’t lending anymore.

Is this really the major reason for the escalation of this crisis? Why has it had such an impact on the entire economy?

Is the economy really that reliant on banks lending to each other?

Andrew asked:


Sub-prime lending resulted in many banks receiving federal aid. To pay for this the government took several loans from itself, weakening the value of the dollar. How does that harm the economy?

guitar god asked:


Why did you screw up the mortgage industry with government mandated forced lending practices to banks under the Clinton administration?

Sean asked:


Investor’s Business Daily: “The White House thinks it can jawbone banks into lending to people they don’t want to lend to. We’ve been down this road before, and it led all the way to the 2007 financial meltdown. The president on Monday gave a tongue-lashing to the ‘fat-cat bankers on Wall Street,’ as he called them the day before. He wants them to make more loans to small businesses and consumers to give the economy a boost. We tried this before. Indeed, it’s the very source of the financial and economic calamity of the past two years.”

Peter asked:


What will happend to the economy if banks are not lending money?
Is it a recession?
Sorry for misspelling the word “happen.”