James K. Galbraith – A Bailout We Don't Need

Byoliveridley

Is this bailout still necessary?

The point of the bailout is to buy assets that are illiquid but not worthless. But regular banks hold assets like that all the time. They're called "loans."

With banks, runs occur only when depositors panic, because they fear the loan book is bad. Deposit insurance takes care of that. So why not eliminate the pointless $100,000 cap on federal deposit insurance and go take inventory? If a bank is solvent, money market funds would flow in, eliminating the need to insure those separately. If it isn't, the FDIC has the bridge bank facility to take care of that.

James K. Galbraith – A Bailout We Don’t Need – washingtonpost.com.

Makes a lot more sense to me than “Give me 700b today or I’ll blow up your economy” line fed by the same administration that gave you “give us the unfettered right to wage war or you’ll be eaten alive by mushroom clouds”.

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One Comment

  1. Gasp! Are you suggesting that throwing 700billion at the problem isn’t going to help?! Well, whyever not.
    Oy, it makes my head hurt. Can’t wait to see how it all shakes out.

Comments are closed.