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Politics : Politics for Pros- moderated
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From: TimF10/3/2008 9:09:39 PM
   of 794098
 
A quote from a long IMF report about financial crises

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"Existing empirical research has shown that providing assistance to banks and their borrowers, can be counterproductive, resulting in increased losses to banks, which often abuse forbearance to take unproductive risks at government expense. The typical result of forbearance is a deeper hole in the net worth of banks, crippling tax burdens to fiance bailouts, and even more severe credit contraction and economic decline than would have occurred in the absence of forbearance.

Cross-country analysis to date also shows that accommodative policy measures (such as substantial liquidity support, explicit government guarantee on financial institutions liabilities, and forbearance from prudential regulations) tend to be fiscally costly and that these particular policies do not necessarily accelerate the speed of economic recovery."

From page 4 of
imf.org
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