Word: mayer
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Dates: during 1970-1979
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...Bankers, Mayer...
...sense when it began in the mid-1960s. To accommodate the financial needs of a rapidly enlarging economy, banks had to grow-and were encouraged by Government regulators to do so. And bankers did not have to have their arms twisted to take full advantage of a profitable situation. Mayer's concern is about the way banks have sought to fuel their growth by boosting income on loans. In the past, he explains, banks drew mostly on the money of their depositors or on bank investments in notes and bonds to accommodate borrowers. When their capital reserves became strained...
...once bitten by the growth bug, many banks threw off the old restraints. They now compete vigorously for loan customers and meet the pumped-up demands for loans with money they themselves borrow-from each other, the public and the largely unregulated Eurodollar market. Such go-go lending policies, Mayer believes, bloated business and consumer demand and contributed in no small way to the present inflation rate. Banks also damage the economy, says the author, by going to capital markets to borrow a large proportion of the money they lend. The practice weakens the Federal Reserve Board's less...
...Mayer's most worrisome charge is that because of risky lending policies, banks now carry billions of dollars of uncollectible loans on their books. These losses, says Mayer, are adding to the already strained resources of a growing number of institutions, not all of them small. As a result, the Federal Reserve Board and the bank regulating agencies are wary of tightening up too drastically for fear of causing more bank failures and intensifying public distrust of the entire financial system...
...Mayer argues that a Government crackdown now would be far less risky than accepting the present situation. "The banking structure that is now building can collapse," he warns flatly. "The larger the regulatory apparatus permits it to grow, the more catastrophic the collapse will be." Should it occur, neither the public nor the men who supervise the nation's banks will be able to say that they have not been warned...