Why the recession is not gonna be over anytime soon

[NJ5]

akuma587 said:

NJ5 said:
akuma587 did the stock market fall because of Lehman Brothers's absence, or did it fall because it made people realize just how big a hole the economy was in? By the way it wasn't just LB going bankrupt at that time, so don't blame everything on LB:

http://en.wikipedia.org/wiki/Subprime_crisis_impact_timeline#September_2008

By the way, not all of Lehman Brothers went into bankruptcy. The core business got sold to Barclays.

The bankruptcy of ten to twenty of these financial institutions would have turned that hole into a canyon.  People freak out when banks start failing.  There is a reason why you had a run on the banks during the Great Depression.  When people don't feel like there money is safe, they want it in their hands right now.  When everybody wants their money in their hands right now, banks don't have any money.  Banks really only hold 10-20% in assets of what their liabilities are.  If you would have had a run on the banks, even banks that were perfectly financially sound would have run out of money.

I'm not just making this stuff up.  It already happened once before last century. 

I give credit for Bush and Cheney for having enough sense to do something about it.  TARP was the smartest decision Bush made while he was in office, although I can't say the Bush Administration handled the money as well as they could have.  But they did avert what could have easily rivalled the Great Depression.

It must be possible to close down a bank in a graceful enough way that people don't stage a run on the bank. With all the creativity the administrations have shown in this mess, it should be possible to transfer depositors to other banks, etc. In fact that's what happened with a lot of the bank failures.

I refuse to believe that the only solution to the banking problems was to save most banks and give them massive amounts of money that they can waste doing business as usual (limited by their capital levels of course). There's a lot of evidence to show that most things the banks were doing wrong before the recession, they're still doing (an example is the bloomberg article I posted above).