1 thought on “The Chancellor launches Plan B: sub-prime loans, inflation and debt”

  1. Posted 04/10/2011 at 12:10 | Permalink

    This is very poorly thought though – and you have beaten me to writing post on this. Osborne seems to think that it is a surprise that small companies don’t use the securities markets. They rely on banks because banks have a comparative advantage in monitoring (not available to holders of securities – they can monitor, but take no action!). This is another mistake that replicates that Fannie and Freddie mistakes – nobody monitored when Fannie and Freddie packaged the loans up – and the loans were packaged up because Fannie and Freddie provided an implicit subsidy. We have the same problem again. I would not be in favour of this but a more rational scheme would involve some partial guarantee of bank loans.

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