NP - The Profligacy of the Lenders

[David Morris]

http://www.slate.com/blogs/moneybox/2012/05/24/german_s_irresponsible_lenders.html

This Bloomberg editorial helpfully drives home the point that you
can't have a debt without a lender:
------------------
Let’s begin with the observation that irresponsible borrowers can’t
exist without irresponsible lenders. Germany’s banks were Greece’s
enablers. Thanks partly to lax regulation, German banks built up
precarious exposures to Europe’s peripheral countries in the years
before the crisis. By December 2009, according to the Bank for
International Settlements, German banks had amassed claims of $704
billion on Greece, Ireland, Italy, Portugal and Spain, much more than
the German banks’ aggregate capital. In other words, they lent more
than they could afford.
-------------------

So if you want to assign blame to a government, then German prudential
regulators are at least as much to blame as southern European budget
writers and in the non-Greece cases pretty clearly more so. On the one
hand, Germans are being asked to pay the price to float borrowing by
citizens of less efficient economies. But on the other hand, Germans
are largely in that position because of their own poorly regulated
banks. That's cold comfort to the German on the street, who's
obviously not a bank regulator, but part of the current game in German
politics is to hide this particular ball so that nobody reforms
anything about the domestic banking sector.