Friday, September 26, 2008

New Banks

One thing we haven't heard very much of is the idea of chartering new banks, but I think we should.
"Let's say you have ten banks and two of them are insolvent. But you
don't yet know which two. So the credit market is messed up for all
ten because at some sufficiently high level of risk credit just shuts down."
Tyler Cowen
We can and probably should work to figure who is the bad credit risk, but we know that it's not the new guy who just came into the room.

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