All too often, decision-makers think that they are doing the economy a favour by saving a bank from insolvency or calling for prudential leniency in order to prolong a riskier type of activity. Their intention, one would imagine, is to safeguard stability and jobs – but unfortunately, it has often turned out to be an unrealistic one.
Instead, all that such leniency has done is make two things more likely in the medium term: financial market bubbles and economic stagnation.