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I agree that bankruptcy is not the answer. What I question is the $700 billion amount and the time frame in which the money will be used. There is a lack of co
by preview 18y ago
I agree that bankruptcy is not the answer. What I question is the $700 billion amount and the time frame in which the money will be used.
There is a lack of confidence that must be fixed. It seems like a smaller amount of money could be used to fix the confidence problem and get the "wheels of credit" turning again. There may also be a need to purchase some distressed securities. With confidence restored, it seems like financial institutions could step back into the picture to buy low and sell high.
- fauigerzigerk 18y agoIn my opinion bankruptcy would be a good solution, if those who made wrong decisions went bankrupt. Unfortunately, it seems impossible to limit the bankruptcies to to just those companies. An interesting question is to what extent counterparties are responsible for the bad decisions of their trading partners. I think they are responsible to some degree, because they should and could have checked the credit worthiness of their opposites. But as the chain of counterparties gets longer, there is just no visibility as to the risks you are exposed to. And at that point it becomes a systemic question. That's the point where the government has to come in and stop things, or even better, not inflate a credit bubble to begin with.
- Prrometheus 18y ago>It seems like a smaller amount of money could be used to fix the confidence problem and get the "wheels of credit" turning again The wheels of credit are turning, just not for the real estate sector: http://mjperry.blogspot.com/2008/09/new-banking-data-wheres-credit-crisis.html http://mjperry.blogspot.com/2008/09/new-banking-data-wheres-... Fears of the credit market freezing up and plunging us into a depression are just that: fears.