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If the government deems all banks “too big to fail”, does that remove the risk?
by mandelbrotwurst 5y ago
If the government deems all banks “too big to fail”, does that remove the risk?
- pxue 5y agono. because bank going bankrupt doesn't wipe away YOUR debt. it wipes away banks obligation to the governing body. also micro-lending will be as big in west as it's in China in the next decade. borrowing 10k to margin trade the stock market is inherently more risky than borrowing 10M for a mortgage.
- Nursie 5y agoHardly, it may (or may not) help to mitigate the fallout though.
- l33tbro 5y agoIf only. The debt becomes worn as inflation and higher taxes.
- asimjalis 5y agoIt makes things worse because the banks now have an incentive to engage in riskier behavior. Their downside is covered by the government and their upside is payoff. So reckless behavior becomes a nobrainer.