> You owe the bank $1M it's your problem, you owe the bank $100M it's their problem and if the bank owes everyone $400B it's the government's problem. Certainly not fair, but pragmatic.
Yes, except that the government has the powers (and had them in 2008) to handle the situation.
> btw, based on your reply I think our positions are probably much closer together than they are far apart.
Agreed.
> I want Glass-Steagall back.
Glass-Steagall was explicitly repealed to allow the merger of Citicorp and Travelers Group which created Citigroup.
Robert Rubin, Clinton's treasury secretary, who promoted for the repeal, joined Citi immediately after leaving government and served as chairmen. He made around $140 million until he had to resign because of the financial crisis.
Citi was too big, too connected, and too corrupt. As long as it so large, it will not be effectively regulated, and it will be bailed out again and again.
If there is no effective regulation, and no legal sanctions, management has a strong financial incentives to take actions that are likely to bankrupt the bank.
There's a great paper about it by two winners of the Nobel Memory Prize in Economic Science. It is based on the lessons of the Savings & Loan crisis.
George Akerlof and Paul Romer: Looting: The Economic Underworld of Bankruptcy for Profit
Yes, except that the government has the powers (and had them in 2008) to handle the situation.
> btw, based on your reply I think our positions are probably much closer together than they are far apart.
Agreed.
> I want Glass-Steagall back.
Glass-Steagall was explicitly repealed to allow the merger of Citicorp and Travelers Group which created Citigroup.
Robert Rubin, Clinton's treasury secretary, who promoted for the repeal, joined Citi immediately after leaving government and served as chairmen. He made around $140 million until he had to resign because of the financial crisis.
Citi was too big, too connected, and too corrupt. As long as it so large, it will not be effectively regulated, and it will be bailed out again and again.
If there is no effective regulation, and no legal sanctions, management has a strong financial incentives to take actions that are likely to bankrupt the bank.
There's a great paper about it by two winners of the Nobel Memory Prize in Economic Science. It is based on the lessons of the Savings & Loan crisis.
George Akerlof and Paul Romer: Looting: The Economic Underworld of Bankruptcy for Profit
https://www.brookings.edu/wp-content/uploads/1993/06/1993b_b...