Comment 29257

By JonC (registered) | Posted March 03, 2009 at 15:17:59

I'm not happy about the bailouts, but deregulation and lack of oversight created behemoth institutions, which are realistically too big to fail. Your argument about letting them fail and see what happens is ridiculous.

What do you think would happen if Freddie Mac or AIG or Bank of America or JPMorgan folded (which all would have happened without intervention)? Do you honestly think oh well, some investors are out some money. The American economy would grind to a halt and what's going on now would be a welcome change. The top five investment firms' funds would have no value, all insured mortgages would be without protection and any bank that hadn't gone bankrupt would have a run on its deposits and since most are leveraged out to a ridiculous degree, that wouldn't last too long. Of course this would also destroy countless small businesses and erode the savings of numerous Americans. Of course, the government insures all bank deposits to a certain dollar amount so they'd be picking up the tab on those which would cost slightly more than the bailout. But by then it wouldn't really matter anyhow, since even if people were able to arrange financing through some new private financier, their currency would be worthless. And of course law & order, civilization going to hell, everyman for himself. Actually, it sounds right up your alley.

New companies might be able to emerge and be better, but not before the entire economy would be devastated and drag down most of the world with it. The bailout is a requirement due to allowing such incredibly massive companies a) form and b) over-leverage themselves.

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