This article asks the questions that many people are asking with the economy in the situation it is in: Should the banks be allowed to fail in our economy, and also, what are the reasons for and against bank expansion.
The author analyzes the situation and asks the reader to ponder whether or not the banks should be bailed out in our economic situation. The problem is that the banks have become "too big to fail," because with their failure would come hard-hitting economic consequences for the country. According to the author, the idea is that smaller banks are small for a reason- if they fail a large bank can buy them and take them over. But clearly, there is a serious problem if the bigger banks fail!
This article argues that there are a number of reasons that it is not necessarily desirable to have bigger banks take over smaller banks all the time.
6 comments:
I think that the economy would take too big of a hit of some of these banks fell. I understand some are concerned about the message this sends to banks, but I think that we should punish them somehow rather than debate the bank rescues.
Well, I actually think of the opposite. US has long stood as a bright symbol of a laissez-faire model. What we are trying to do right now wouldn't be called that way at all. Banks, especially big banks, have taken too much risks. This has happened for a long time, has built up, and now accumulated and results in the current credit crunch. Sure, leaving them fail might lead to an immediate depression. But as a cycle, the economy should heal itself and recover after 2 or 3 years. If we continue to just help every bank (even insurance company... wat business does Fed have with AIG anyhow?), we only defer the pain (the pimple >_<), but it will still eventually BREAK out. I also think the longer we defer, the worse things might be. i might sound pessimistic, but i cant help it.
I think that for right now some of these banks need to be bailed out, it seems to me that we built our economy upon the principles of big banks and big business and that this laissez faire model has come back to bite us. We may be hypocrites for bailing out after we have forced so many other developing countries to build from the ground up and now we are bailing ourselves out, but without doing so it seemed a global recession that would hurt everyone would be inevitable. Instead we need to now be focusing on the future and how to improve our regulation and competition, and maybe that does entail no longer allowing a bank to become quite that large without supervision.
Only time will tell if these were the right moves. Yet for now, there is no way to know. But like some of you guys said, it is clear to me that SOME big banks had to be bailed out. But the problem is who and how much.
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