Power & Market

Larry Summers Apologizes for his Rothbardian Insight and George Selgin Exhales

Larry Summers affirms the Rothbardian critique of fractional-reserve banking on Twitter...

SVB committed one of the most elementary errors in banking: borrowing money in the short term and investing in the long term. When interest rates went up, the assets lost their value and put the institution in a problematic situation. https://t.co/HxsgqpZOuL

— Lawrence H. Summers (@LHSummers) March 14, 2023

...but then takes it back...

Responding to some of the comments here: Of course banks borrow short and lend long, but properly managed and supervised banks limit duration mismatch between liabilities and assets so their capital position is not gravely compromised by rising long-term interest rates.

— Lawrence H. Summers (@LHSummers) March 14, 2023

...and free banker George Selgin breathes a sigh of relief at “Prof. Summers” retraction.

I’m glad to see, upon reading on, that Prof. Summers explains himself in the comments. Still, I was taken aback upon first seeing this tweet by him attributing SVB’s troubles to its having done what all banks always do! https://t.co/EAAYc4ZrOS

— George Selgin (@GeorgeSelgin) March 14, 2023
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