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Why Rescue Big Banks?
Summary --
Are the bank bailouts a reward for bad behavior? Maybe. But keeping large financial institutions in business still makes sense.
Related
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Does the current financial crisis resemble Japan's "lost decade" of the 1990s? It may be even worse, argues Robert Madsen. Not so, replies Richard Katz.
Comment, April 27, 2009
An annotated Foreign Affairs syllabus on the Great Depression.
Essay, Nov/Dec 2009
The global economic crisis has revealed the folly of large U.S. budget and trade deficits, as well as of the strong dollar that makes them possible. If it is serious about recovery, the United States must balance the budget, stimulate private saving, and embrace a declining dollar.
Comments
Didn't make the case
This article makes the argument that large banks are useful, but I am not sure that argument needed to be made, of course they are. To reach the conclusion that large banks that took excessive risk and failed should be propped up, Mr. Kubarych has assumed that in failing the banks would vanish, leaving not a trace of the human expertise or the information systems that once were there.
That argument fails to even consider that in restructuring/bankruptcy it is possible that whole departments could be sold, intact, to banks with competent management. Or at the very least, displaced talent would be quickly hired by smaller banks seizing on the opportunity to grow.
I would argue that in the vacuum Mr. Kubarych assumes lay the potential for intermediate sized banks to fill the void, expand and merge, and ultimately replace not only the irresponsible banks, but also the notion that any business is too big to fail.
Didn't make the case
This article makes the argument that large banks are useful, but I am not sure that argument needed to be made, of course they are. To reach the conclusion that large banks that took excessive risk and failed should be propped up, Mr. Kubarych has assumed that in failing the banks would vanish, leaving not a trace of the human expertise or the information systems that once were there.
That argument fails to even consider that in restructuring/bankruptcy it is possible that whole departments could be sold, intact, to banks with competent management. Or at the very least, displaced talent would be quickly hired by smaller banks seizing on the opportunity to grow.
I would argue that in the vacuum Mr. Kubarych assumes lay the potential for intermediate sized banks to fill the void, expand and merge, and ultimately replace not only the irresponsible banks, but also the notion that any business is too big to fail.