Bank intervention temporary and necessary

ARTICLE: Stiglitz: Temporary Bank Nationalization Necessary, By Barry Ritholtz, The Big Picture, July 19th, 2009

My thoughts all along have matched what Stiglitz says here: it's temporary and necessary and therefore hardly the equivalent of "socialism."

(Thanks: VacationLaneGrp)

Comments

[Matt Scarborough]

With the benefit of hindsight I think the best option would have been the one dismissed out of hand by most people: bankruptcy. We ended up with the worst of all pathways by starting in that direction and then switching to government bailouts, but our bankruptcy laws / courts are our most tested mechanisms for dealing with insolvency issues.

There is a huge distinction, often missed in the discussion, between the government addressing a liquidity issue vs. a solvency issue for the banks. Liquidity is a proper and historical function of the central bank, but solvency should be addressed through bankruptcy.

Once one thinks past the initial histeria bankruptcies would have been the best of all of the bad paths

[Steven J.]

Tom is right on this. History lessons of Great Depression support all actions taken by Bernanke & Co. Credit is the machinery that makes Capitolism work. With out it, everything stops. Literally.

Without bank solvency, there is no bank liquidity.

With in hours of Lehman Bros. failing, deposits left banking industry by the Hundreds of Billions of $'s and IF banking industry was left alone at that point , then asset devaluation would of destroyed U.S. economy for decades.Don't buy the "socialism" rants by the far right. The bank asset purchases via TARP were set up to go back in the Treasury w/in 5 years or sooner....provided Congress don't screw it up after the fact.