Would it Be Better For Banks to Lend With More Care or Lend With Abandon?

I was reading It’s Official: You Can’t Blame Banks For Not Lending Anymore and the statement was made:

There’s also the possibility that, while there is less of a demand for new debt, banks are also on the brink of tightening lending standards again, worried about new capital requirements from the Fed and Basel III. That could slow down the U.S. growth story again, resulting in damages to the recovery.

That’s an excellent point. While we want better protection for consumers from bad bank practices, are we willing to do that at the detriment of growth?

The economy is fueled primarily by consumption of products. Both jobs and wages are created when demand rises and demand rises when money is easier to borrow to fuel that demand.

So should we be satisfied with tighter lending by banks and credit card companies if the result is a slower economy and less jobs and lower wages?

What do you think. Is it possible to have both, are they of equal importance or should we allow capitalism to have a freer rein?

Post your comments below.


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