Suppose I owned a small business, I was creditworthy, and I thought I had an investment opportunity that I could only take advantage of if I got a loan. Well, I look into it and I’m eligible for a loan. But the interest rate is pretty high. And yet, it’s not so high that the loan isn’t worth taking out. So I’ll take out the loan, right? Well, I might. But then again I might not if I thought that next week the government was going to take action that would make credit easier to get.
Similarly, suppose I owned a bank and was considering taking a risk lending some money. It looks a bit risky, but it also looks like a risk that will probably pay off. Do I make the loan? Well, I probably do. But what if I think that failing to take risks on lending money is likely to bring persuade the government to extend a helping hand?
Previous in TP Yglesias
By clicking and submitting a comment I acknowledge the ThinkProgress Privacy Policy and agree to the ThinkProgress Terms of Use. I understand that my comments are also being governed by Facebook, Yahoo, AOL, or Hotmail’s Terms of Use and Privacy Policies as applicable, which can be found here.