A Quote by Eric Maskin
If I'm a bank, and I'm making risky loans, I have an incentive, if I can, to make those loans using other people's money: in other words, to make highly leveraged loans.
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If there were not derivatives, there would be no bank loans at all today, because people want to get fixed-rate 30-year loans, but banks don't want to keep 30-year loans on their books.
A world where wages no longer rise still needs consumers. Middle-class purchasing power has been maintained through loans, loans and more loans. The Calvinistic reflex that you have to work for your money has turned into a license for inequality.
In the past when money was given from government to government, there was no accountability, especially the World Bank loans. Nobody was held accountable for the misuse of World Bank loans. That is why it is important to channel some of the money through civil society groups.
I founded Grameen Bank to provide loans to those considered traditionally unbankable. Grameen Bank works with the poorest and often illiterate, providing uncollateralized micro-loans for tiny business enterprises by which they can lift themselves and their families out of poverty.
So we are in for years of debt deflation. That means that people have to pay so much debt service for mortgages, credit cards, student loans, bank loans and other obligations
that they have less to spend on goods and services. So markets shrink. New investment and employment fall off, and the economy is falls into a downward spiral.
When you say "bank," a bank is a building, a set of computers and chairs and things. The bankers are the people running these banks. They're the chief officers, and they push the loans because they don't care if they go bad. For one thing, they may package these bad loans and sell them off to gullible institutional investors.
Our focus is more on secured retail business like housing and car loans. While we will do some unsecured loans - credit cards and personal loans - we will do it primarily with existing customers.
Making loans accessible to millions of the previously unbankable customers is a noble goal. Getting them hooked to such loans isn't.
When the financial system works as it should, money and capital flow to and from households and businesses to pay for home loans, school loans, and investments to create jobs.
What people do is they pay the small loans first. Why? Because they enjoy making the number of loans smaller. But of course it is a very ineffective way to pay debt down.
Imagine you have six loans, small to huge. People want to close loans and because of that, they try to pay off the small loans, but that's not the right strategy. The right strategy, of course, is to pay the loan with the highest interest rate. People make this mistake and it costs them lots and lots of money, it's a very expensive mistake because interest rates accumulate and become very, very expensive very quickly.
If banks anticipate government will come to the rescue should the credit market go badly awry, they may make loans that would otherwise be imprudent, e.g. subprime loans with little prospect of repayment.
When students have access to low-interest loans and government aid, colleges have no incentive to cut costs. Why should a college lower tuition if more students are able to pay with subsidized loans from the government?
The nation's largest savings and loan, Washington Mutual, has become the biggest bank failure in history. See, the problem with the savings and loans? Not enough savings, too many stupid loans, okay In fact, they changed their name from WaMu to 'screw you.'
Payday loans are but one of many financial techniques - from overdraft fees to student loans subsidizing for-profit colleges - specifically designed to pull money from the pockets of the poor. This problem generally goes unrecognized by policy makers.
Even President Bush has cited the need to outlaw the practice of corporations making loans to their officers. Strangely enough, when the President was a corporate officer, he took out several loans from the company.
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