| HappySqurriel said: "Too big to fail" is just a phrase that is used to defend companies and industries which have close ties to political parties, and other large companies and industries that are not lucky enough to have this distinction (say Exxon Mobile and the oil industry in general) can risk being put out of buisness without any political help.
Now, just as a question, being that the financial institutions have used their political power to get the government to ignore or change any regulations that stood in their way what makes you think that anything they do today will actually "protect" consumers? Being that Obama is very close to the architects of this mess, what makes you think that these changes will benefit consumers and not financial institutions? |
I think it's possible to protect both, if a system can be constructed which prevents the formation of bubbles, or at least limits the size and severity of bubbles.
The consumers who were sold mortgages which they couldn't afford to make payments on aren't the only victims here. When they defaulted and their homes were put up on the market, the glut of supply dropped the bottom out of the real estate market. At that point, a lot of home owners who were perfectly capable of making payments found themselves with mortgages that exceeded the value of their new homes. Some accept the rotten deal because they want the house, but others mail their keys into the bank and just walk away. Now even responsible borrowers and lenders get burned by the bubble.
If you can stop the bubble, the responsible borrowers get to keep their house as a worthy investment, and the bank gets a loan repaid with interest, instead of a severely devalued house.
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