George says give them a break August 30, 2011 at 7:37 am
In a great article on Bloomberg, George Magnus reprises his what we can learn from Marx about the current crisis theme. He has five policy prescriptions, all of which are worth reading; here I will concentrate on the third
…to improve the functionality of the credit system, well-capitalized and well-structured banks should be allowed some temporary capital adequacy relief to try to get new credit flowing to small companies, especially. Governments and central banks could engage in direct spending on or indirect financing of national investment or infrastructure programs.
Exactly. Now is precisely the wrong time to be increasing minimum capital requirements. As George says, our prime focus should be on creating jobs, and a frozen credit system is not helping. I would cut capital requirements on corporate loans (only) by 50% for at least two years.