Why we need bank regulation
The big banks are pushing for a federal bailout right now, and they're probably going to get one. The reason: We simply can't let the banking system fail. If a few of the big banks failed (say Citibank and BofA) that would almost certainly take down the whole system (think 1933). The government simply can't let that happen. The banks know that. They know they will be bailed out (think S&L crisis) if they get into trouble. That's why they're so willing to get themselves into trouble in the first place (think moral hazard, otherwise known "as heads, I win, tails, you lose.") They place a big bet on a risky outcome. If it turns out well, they win. If it turns out badly, they get bailed out.
That's why we need comprehensive banking regulation, something we had up till about the time of the Reagan administration. Since then, we've progressively wandered down the path to total anarchy.
That's why we need comprehensive banking regulation, something we had up till about the time of the Reagan administration. Since then, we've progressively wandered down the path to total anarchy.
posted by walldon | 9:15 AM
1 Comments:
Thank you for mentioning Reagan's responsibility for our current mortgage crisis. I was very irritated by the news coverage at the time of his death. In all the stories on television about his life, I never once heard a mention of the savings and loan crisis he caused. There was a lot of other harm Reagan caused that was also overlooked. The regulations of savings and loan institutions worked well to benefit of many homeowners until Reagan dismantled them.
Post a Comment
<< Home