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Yes, you do. If they are by definition too big to fail, then them shutting down could cause runs on banks. When people's confidence in banks crashes, then very
by docker_up 8y ago
Yes, you do. If they are by definition too big to fail, then them shutting down could cause runs on banks. When people's confidence in banks crashes, then very bad things happen to our financial system which is predicated on the idea of people keeping their money in banks and bank accounts.
Even people pulling their money out of money market mutual funds almost caused a collapse of the monetary system, which is why the Fed had to secure those.
- jhayward 8y agoInstead of bailing out the banks, they could easily have simply been put in receivership, with Treasury as the recevier in control. Simply re-capitalize them from the federal reserve, and they don't have to miss a single hour's worth of operation. Unwinding the mess of CDOs, etc. would have been long and tiresome but, with a little help from a convenient executive order or two perfectly do-able.