Moreover, improvements in econometric modeling and the importation of optimal-control methods from engineering were seen as having the potential to tame the business cycle. Of course, the prevailing optimism had its dissenters, notably Milton Friedman.
Banks have to continue to manage non-performing loans (NPLs) effectively, so that they do not build up in balance sheets, hindering efforts to strengthen capital and undermining market and consumer confidence. In Europe there is a discussion around initiatives aimed at setting up or improving the functioning of special purpose vehicles focused on the management of NPLs (asset management companies, or “bad banks”).