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Another reason for capital market imperfections associated with limited commitment is the ability of the borrower to renegotiate the terms of the contract ex post. Even though the contract is signed as a secured loan , because of the enforcement costs, the lender never gets the full payment in case of default.
The value of capital goods is brought into line with the value of future consumer goods through competition in financial markets, because competition for profits among capitalist financiers' rewards entrepreneurs who value capital more correctly (i.e. anticipating future prices more correctly) and eliminates capitalists who value capital least ...
Credit rationing is not the same phenomenon as the better-known case of food rationing. Credit rationing is the result of asymmetric information whilst food rationing is a result of direct government action. With credit rationing, lenders limit the risk of asymmetric information about the borrower through a process known as credit assessment.
It was definitely a "hurrah" moment when Bank of America's (NYS: BAC) third-quarter earnings report revealed a pumped-up Tier 1 capital ratio of 8.97%, trumping that of Wells Fargo (NYS: WFC) and ...
(Reuters) -Major banks and business groups sued the Federal Reserve on Tuesday, alleging the U.S. central bank's annual "stress tests" of Wall Street firms violate the law. The lawsuit filed in U ...
Stocks are suffering from a New Year’s ‘hangover’ for 3 reasons, Capital Economics says. Will Daniel. January 3, 2024 at 3:54 PM. ... Some of Goltermann’s reasons are benign, but some ...
Rationing is the controlled distribution of scarce resources, goods, services, [1] or an artificial restriction of demand. Rationing controls the size of the ration, which is one's allowed portion of the resources being distributed on a particular day or at a particular time. There are many forms of rationing, although rationing by price is ...
Credit becomes less available at any given official interest rate, or there ceases to be a clear relationship between interest rates and credit availability (i.e. credit rationing occurs). Many times, a credit crunch is accompanied by a flight to quality by lenders and investors, as they seek less risky investments (often at the expense of ...