When making their loans, the bankers should have thought more carefully about how easily they could call back the money - essentially a question about the liquidity of the loan.
In "The Ascent of Money," Niall Ferguson highlights the crucial aspect of liquidity in the lending process, suggesting that bankers should have been more attentive to how easily they could retract their financial support. This consideration of a loan's liquidity is vital, as it directly impacts both the lender's security and the borrower's ability to repay under varying conditions.
Ferguson's analysis emphasizes that a thorough understanding of liquidity risks could have influenced better decision-making in the banking sector. By reflecting on the potential consequences of calling back loans, bankers could have avoided some of the pitfalls that led to financial instability in the past.
