Unshackle the Banks to Prevent a Deep Recession
Much has been done in recent days to bolster financial instituions, but there’s one big thing left to do.
Banks have received much help, but more needs to be done.
Photographer: Spencer Platt/Getty Images
Unlike in 2008, when the banking sector brought about the financial crisis, today it can help keep the economy from suffering a deep recession — but only if reforms enacted by regulators in the last decade are relaxed.
Central banks around the world have quickly sprung to action cutting interest rates and reactivating various financial crisis era programs. Although these steps are necessary, they rely on the banking system to transmit easier financial conditions into credit for the economy. The issue is that several reforms enacted after the financial crisis will limit the banking system from optimally responding to central banks’ actions. In short, any rule or regulation that restrains efforts by the banking system to promote growth should be suspended until the current crisis subsides.