| Final-Fan said: mrstickball: so --just double checking -- you're saying that if the government had simply allowed the banks to fail (and the smaller banks would rise from the ashes), the consequences of that situation would be as good as or better than (or, if you prefer, as bad as or less bad than) the consequences of the government intervention that in fact took place? |
I believe that had the government not bailed the banks out at the first sight of problems, it would have been better in the end.
As NJ5 said, the banks inflated assets. You don't fix that problem by bailing them out, you fix them by letting them be purchased at what they are worth.
Had the banks been let to fall, the government then could have gone in, and ensured that credit could have flowed, and then helped the banks at discount rates which did not happen. How much would the government have paid to bail the banks out 3 months later? 6 months later? I am going to go out on a ledge and say 'hundreds of billions'. If the government wanted to bail the banks out, that's fine. However, I believe they did it at a very 'safe' time of ensuring they helped everyone, but paid a huge fiscal cost to do it.
Back from the dead, I'm afraid.
