i'm richard dekaser. >> susie: and that's nightly business report for monday, august 10. i'm susie gharib good night, everyone. and good night to you, paul. good night, susie. i'm paul kangas wishing all of you the best of good buys. "nightly business report" is made possible by: this program was made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org

he's richard dekaser, esident of woodley park resech and the formerhief economist of national city corporation. >>eporter: most people would agree that it makes sense toet aside money during good timeto weather e bad ones. that why 90% of state governments have rainy day fds and 60% of american falies save some of their ince. but bank regulation nes to do more in this regard. as things now stand, ban are requed to hold capital at around 10% of sets to protect depositors, taxpayers and investors from their insolvey. but whenhe economy turns down d losses increase, capital disappears. en, banks have two options t maintain their capal ratio: ise more capital or reduce assets. cause times are tough and investors are skitti, raising additional capal is expensive when possible at a. so instead ty opt to reduce assetswhich means less lending and titer credit precisely when the oppositis required. moreover, when ban dump assets en mas, as we saw last year, the rush for the exitsepresses asset values, fuher increases losses and a vicious cycle tes hold. this cycle works in reverse during good times, by