Indeed, in the second quarter of this year, real business fixed investment was 4 percent below its level at the trough of the recession - an unusually weak investment performance almost two years into a recovery. Financial conditions undoubtedly played an important role in these developments. In the late 1990s, financial conditions were easy.
It must be the case that, on average over long periods of time, these agency problems are contained tolerably well by the rules of the game – by some combination of private governance and public policy – or else our credit markets would not be as large and as well developed as they are.