Twelve turbulent months after the giant investment bank Lehman Brothers filed for bankruptcy, President Obama on Monday said the economy is beginning a "return to normalcy."
Of course, "normalcy" is relative term. "Return" is a relative term, too. After the near-collapse of the banking system — and a resulting meltdown in consumer confidence — a sustainable recovery will take years. A recovered economic model probably should look much different than the one that preceded it.
If panic is giving way to prudence, that's a good thing. If we're in a mode of lower risk and reduced expectations, that's good, too. If we aren't, after the painful economic hangover that struck a year ago, then shame on us.
As the Associated Press is reporting this week — on the anniversary of the Lehman collapse — the nation's surviving banking giants are bigger and are resuming some of the risky investments that triggered last fall's crisis. Some risk-taking is necessary, of course. Every loan to a first-time home buyer or a fledgling or expanding business has some risk to it, and those loans are necessary to help the housing and job sectors rebound. What we cannot afford is to see large lenders tossing aside caution — emboldened by, and not chastened by, the government's rescue efforts of 2008.
As Lawrence Summers, director of the White House National Economic Council, told the AP: "You cannot rely on the scars of past crises to ensure against practices that will lead to future crises." A sobering, but not inaccurate, critique of human nature.
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