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You mean during the crises? Would that have helped? How would you allocate the troubled assets to the baby banks? If you put them all in one place, that bank w
by Benjo 16y ago
You mean during the crises? Would that have helped? How would you allocate the troubled assets to the baby banks?
If you put them all in one place, that bank would fail and still cause the same chain reaction, except the debt would fail entirely on the customers of the bank instead of the bank itself.
If you spread out the assets, then you'd just have lots of smaller banks fail instead of the larger bank. I suppose doing this could have spread the failures out over time.
- asmithmd1 16y agoBy all means put out the fire by doing what they did in the moment. But then respond not by passing ineffectual legislation that will surely be gamed and circumvented but with stress testing the banks to see which ones are too big too fail and breaking them up until they are small enough to fail. As to who gets the "toxic" assets, who cares? They are all but worthless. Auction them off to whoever will buy them that way we no longer have this fiction that they will ever be worth anything. The US tax payer is now explicitly on the hook for these assets. The sooner we know what they are truly worth the better.
- Benjo 16y agoYes, I'm not sure why the government chose not to do this. My guess is that the large companies effectively have too much influence over reelection of congressmen to allow anything like this. The government seems to have chosen instead to increase their power in handling these crises.