> He ignores the fact that no institution can make a realistic solvency determination during a crisis. What that means in practice is he supports things like TA

> He ignores the fact that no institution can make a realistic solvency determination during a crisis. What that means in practice is he supports things like TARP. I don't think either of these sentences are true. Friedman wasn't for bailouts for those that did wrong, he simply knows that a deflationary spiral can occur if there is a cascading banking failure. Which is what happened in the Great Depression, and what was avoided in 2007/08. It should also be noted that TARP made the public money. > Should be born by the public rather than the financial sector. That is also not true. The issuer of money explicitly a tool of the government (even if the Fed itself is technically private.) The reason the Fed has to step in, is because the actual equation for money supply includes the velocity of money. If economic activity crashes, the money supply goes down. That is accelerated further due to complex financial instruments such as derivatives. The Fed shoring up balance sheets with low interest loans alleviates that during economic downturns. There is a side effect that some firms are able to use this opportunity to enrich themselves, but it is rarely at a great cost to the public, relatively speaking.