In the final segment of our interview with Leo Panitch, Leo explains the reasons for the credit freeze. Leo explains that the banks’ preferred option of passing off the risk of their loans, by packaging them in securities, is all but extinct. This creates a dual problem of a banking system not used to calculating risk and individual banks with securities that they cannot sell, and therefore cannot value. The result is an unwillingness to lend. Following this, Leo provides his analysis of the systemic options being suggested as alternatives.
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