Indeed, lending to governments and banks in the European periphery represents the European equivalent of subprime lending in the US (which was also concentrated in a few sunshine states).

And essentially the same happened with US subprime mortgage lending and with the Spanish banking system in the 2000 s.

A good proportion of the losses on subprime lending was thus borne by banks from Northern Europe, leaving these banks in no position to sustain further losses on their European peripheral lending.

Indeed, subprime mortgage lending delivered illusory wealth increases to Americans at a time when they were suffering from stagnant or falling real wages.

Europe s Subprime Quagmire

Sub Saharan Africa s Subprime Borrowers

The global financial crisis, which began in 2007 as a crisis of US subprime lending and has broadened into a European sovereign debt (and banking) crisis, has raised questions that we cannot answer, owing to over specialization and fragmentation of knowledge.

This, of course, is just the story of subprime mortgages in another guise.

A year ago, however, with the subprime mortgage meltdown of August 2007, I became certain.

The first lesson is that, despite the limited overall volume of subprime loans, the subprime crisis could blow up into the biggest financial crisis in living memory, because an overstretched financial system was unable to cope with even limited losses.

The IMF s Lending Overhaul

Lending in the Dark

(d) Consumer Lending (CLP)

(b) Solidarity Group Lending (SGL)

In Greenspan s words, the self interest of lending institutions would protect shareholders and the economy from lending excess.

To get more people to borrow more money, credit standards were lowered, fueling growth in so called subprime mortgages.

The EIB should expand its lending.

Nor do existing international lending institutions.

During the subprime boom, large banks were more likely to want to expand, and thus had greater incentive to comply.

Lending to eurozone governments continues to have a zero risk weight. This will only increase the bias in bank lending towards government debt and against lending to enterprises, especially small and medium size businesses.

Lending dried up and economies started shrinking.

After the subprime crisis erupted, mortgage and consumer debt was paid down by households either with their savings or by default.

BRUSSELS Back in 2007 2008, when the financial crisis was still called the subprime crisis, Europeans felt superior to the United States.

One governor opined that the Fed should regard it as a good thing that markets were starting to worry about subprime mortgages.

This is reflected in the World Bank s lending.

It all started from careless and inappropriate lending.

The effect was especially pronounced in lending to non financial companies, whereas lending to households an area with traditionally lower internationalization remained more robust.

We saw this in the summer of 2007, when the subprime crisis erupted, and again in 2008, following the collapse of Lehman Brothers.

This justifies government regulation of lending and investment practices.

After the 1970 s, though, sovereign lending became institutionalized.

But simply lending more would not improve the situation.

Stresses the importance of promoting responsible borrowing and lending

Coming so shortly on the heels of the subprime crisis, the debate over the debt ceiling and the budget deficit is the last straw.

In 2011 2012, such lending grew by 1.1 trillion, reaching 3.6 trillion (23 of total bank financing), while balance sheet lending increased by only 732 billion.

Similarly, in 2011, Spanish banks increased their lending to the government by almost 15 , even though private sector lending contracted and the Spanish government became less creditworthy.

3. Stresses the importance of promoting responsible borrowing and lending

Bank regulation, like lending, was once decentralized and judgment based.

Our lending can provide breathing space for countries in difficulty.

Banks in Italy, Spain, and elsewhere are not lending enough.

Now European countries finance 42 of IMF lending and 62 of concessional World Bank lending. This task will have to be shared by emerging countries with large reserves.

During the crisis, the level of banking activity fell particularly strongly in capital intensive areas such as traditional lending to the private sector. The effect was especially pronounced in lending to non financial companies, whereas lending to households an area with traditionally lower internationalization remained more robust.

Never mind the subprime crisis of August 2007 or, closer to home, the European monetary crisis of August 1992 the August holiday is a venerable tradition.

But worrying signs about China s seemingly benign lending practices are emerging.

But lending would be inhibited even if the banks were healthier.

Official development assistance and multilateral bank lending, though valuable, remain insufficient.