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The borrowers might have thought these were safe loans, but it turns out they bet the house".
"It's not that it's impossible to issue safe loans, it's that if you are invested in taking shortcuts, maybe this is a little difficult".
Mindful of German objections to purchasing sovereign debt, the ECB has already started down this path by buying two kinds of private-sector assets in late 2014: covered bonds (debt issued by banks that is backed by safe loans) and asset-backed securities.
In Merrill Lynch's case, these commitments far exceed the bank's capital base although they also include safe loans to blue-chip companies.Buying shares of an investment bank today is "more of a religious experience one based on faith than an investment", says Dick Bove, of Punk Ziegel, an investment bank.
Believe it or not, it is now possible to earn yields of 6% or more, making relatively safe loans to complete strangers.
Fed Governor Bernanke needs to urgently get all borrowing costs down -- for companies as well as households; for risky as well as safe loans.
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"This is a safe loan based on statistics," said Jack Shaw, the alliance's vice president for operations.
"While lenders must determine their customers' income and other resources, some may go overboard in order to make it a safe loan or to make sure they meet all government requirements," he said.
"The rule sets standards for what's a safe loan and what isn't," said Kathleen Day, a spokeswoman for the Center for Responsible Lending, "and it takes away a lot of the tricks and traps that lenders were using to talk people into refinancing".
"It's a very safe loan for them".
Monetary incentives can also work well, as long as they only reward staff for growth if they produce safe loan portfolios.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com