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"the existence of a "lender of last resort" such as the Fed " This. The moral hazard here is enormous. And why should the Fed serve the interests of equity own
by jdkee 7y ago
"the existence of a "lender of last resort" such as the Fed "
This. The moral hazard here is enormous. And why should the Fed serve the interests of equity owners over the national interest in a strong, reserve dollar?
- RealityVoid 7y agoMy feeling is that the answer to this is because these companies (arguably) produce something of value to the world. Letting them become bankrupt would mean they do not produce that something of value so that would be bad economics. And a case of not seeing the forest for the trees. The role of economy is to sustain a certain confort to the population, an people should forget that at their own peril.
- ahelwer 7y agoBankruptcy doesn't mean the company's assets are thrown in the trash. It just means the current equity & bond holders get rinsed. Other presumably smarter people can then come in and run the company.
- toomuchtodo 7y agoThey mustn’t even be smarter, simply more ethical and responsible.
- dragonwriter 7y agoThey needn’t even be more ethical and responsible, either. Calvinist mythology aside, financial success isn't a symptom of moral virtue.
- akiselev 7y agoIsn't the nature of a bankruptcy largely at the discretion of a judge?