Lazy bankers better than crazy bankers
Nobel Laureate, Paul Krugman argued that banking should be boring. According to him there is a negative correlation between banking and economic stability. Whenever banking gets exciting economy is jeopardized. So maybe boring banking is the best.
COMMENTATORS NEVER run short of adjectives to describe bankers. Quite a few years back, an economist called Indian bankers ‘lazy’ when they stopped lending and were buying only government securities. On the other hand, whenever banking got exciting, it went out of hand and jeopardized the stability of the real sector and economy. But ‘dull’ and ‘boring’ banking always ensured economic progress. So should banking be ‘dull’? A financial instability hypothesis reveals that good times lead to bad. That’s because when times are good, people become overconfident, start to speculate and borrow to support the speculation. Borrowers as well as lenders take on more risk in the belief that the good times will last forever. The bubble then bursts, debts are called in, speculators are unable to pay up, leading to unwinding of debt across the board, asset prices crash and the economy grinds to a halt. Many argue that banking is a business of the ‘dumb’. A bank borrows cheap, lends dear and makes the spread. Banks should follow old and traditional 3 - 6 - 3 formula: pay depositors 3 per cent interest, lend money at 6 per cent and head off to the golf course at 3 pm. From the 24/7/365 perspective of today, that may appear romantic but is hardly practical. There were few adventurers once who dared to say bankers are a ‘smart’ lot. I am not very sure though whether smart is an appropriate antonym of boring. Well the thesaurus throws up others like fascinating, and interesting. Let’s just wait and watch for the next adjective!!!
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