by Mario Rizzo
This is your final exam.
Question: Suppose you are a profit-maximizing bank, which course of action do you take: (a) Lend $1 million to Herman Dilbert’s Chicken Finger Brasserie or (b) Buy $1 million in 10 year 3.5% Treasuries?
Answer under the fold.
If you answered (b) then your job at XYZ Bank is safe. If you answered (a) you have a job as an economic (political?) advisor in the Obama Administration.
For a more serious treatment of these issues, see Jerry O’Driscoll’s analysis in today’s Wall Street Journal.