5 ms·
I'm all for wiping out bank shareholders to zero and sending corrupt executives to jail... but if the financial system and the public lose confidence in Deutsc
by cs702 10y ago
I'm all for wiping out bank shareholders to zero and sending corrupt executives to jail... but if the financial system and the public lose confidence in Deutsche Bank, one of the world's largest banks, we could end up with another global financial panic like the one we saw in 2008.
By many accounts, the second leg of the Great Depression of the 1930's started with the failure of an Austrian bank, Creditanstalt, in 1931, triggering financial panic and a wave of bank failures that ultimately affected everyone. See https://en.wikipedia.org/wiki/Creditanstalt#First_Republic https://en.wikipedia.org/wiki/Creditanstalt#First_Republic , http://www.bloomberg.com/news/articles/2011-04-20/lessons-from-the-credit-anstalt-collapse http://www.bloomberg.com/news/articles/2011-04-20/lessons-fr... and http://www.cambridge.org/catalogue/catalogue.asp?isbn=0521030293 http://www.cambridge.org/catalogue/catalogue.asp?isbn=052103... , for example.
The world cannot afford to have another global financial panic. The outcome could be catastrophic. Lenders, including depositors like your Aunt Tilly and Jack the plumber, should not have to worry about the safety and liquidity of their money.
The financial system is infrastructure -- like the electricity grid and the Internet. We cannot afford to have this infrastructure come to a halt due to the fear or stupidity of greedy executives. Businesses and consumers depend on this infrastructure every day.
- ethanbond 10y agoSo how about we bail out the institutions and throw the executives in jail? That seems like a good compromise.
- atmosx 10y agoAmen. Bringing accountability in the banking sector? That's a refreshing thought and a decisive step forward to save, whatever can be saved from the EU.
- pizza234 10y agoAFAIK, in case of criminal charges, the bank license could be revoked as consequence; that would match the fact that [AFAIR] there are often N zillions of dollars in fines, but never charges against the executives.
- sandstrom 10y agoIt's not enough to jail executives. It's also important that all institutional lenders (money market funds etc) that has financed the bank (in addition to all equity holders) take a hit.
- yxhuvud 10y agoThe obvious way to wipe out both shareholders and keep the bank functioning is to supply capital to the bank, but take ownership in return. As the bank is worth less than 0 before the bailout (or one wouldn't be necessary) it would be a total wipeout of shareholders.
- wu-ikkyu 10y ago>The financial system is infrastructure -- like the electricity grid and the Internet. The key difference being that the financial system is a purely informational form of infrastructure. Where as the electricity grid and Internet are physical, real forms of infrastructure. Information is far more easily recuperated (thanks to the internet/electricity grid) when a crisis occurs (i.e. a "bubble") than when a crisis occurs to physical infrastructure like the internet or electricity grid (i.e. an EMP).
- TeMPOraL 10y agoOn the other hand, physical infrastructure failures are pretty much always local - you can lose the grid in a city, state, or even whole country and, while bad, the negative consequences will be contained and limited - neighbouring cities/states/countries will jump in and help. A cascading problem in the global financial system could make half of the western world go hungry, or even start another major conflict.
- emp_zealoth 10y agoSo we are going to indefinitely be held hostage as the financial sector slowly deteriorates with each next symptom-cure bailout after another?