Abstract:
The causes of the Great Recession that began in 2008, and the solutions to prevent a recurrence, have been argued over endlessly. The government has responded with various actions: e.g., the Dodd-Frank Act (2010); stronger oversight of the activities of commercial and investment banks; and other measures. A significant unaddressed financial concern are the procedures for bank lending to businesses, which is largely unrestricted as to loan policies, required collateral and other safeguards, and the strength of loan covenants that protect the bank during the duration of the loan. This paper discusses the situation with regard to loan covenants and suggests various remedies.
