Skip to content

LRB · Donald MacKenzie · The Magic Lever

May 5, 2013

See on Scoop.itMore … or less!

“The idea of risk weighting seemed sensible, even necessary, as a guard against banks’ being tempted simply to accumulate the riskiest and thus highest-yielding assets. However, banks’ aversion to equity created a huge incentive for them to reduce the risk weights of their assets even in ways that did not in fact reduce actual economic risks. As my colleagues at the Centre for Research on Socio-Cultural Change at the University of Manchester show in their book After the Great Complacence, much of what has counted over the past 25 years as ‘financial innovation’ has been a response to incentives of that sort.”

[via @henryfarrell]

Manuel J. Matos‘s insight:

A relatively short text that explains a lot about our present economic situation.

See on www.lrb.co.uk

No comments yet

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: