On Mar 16, 2010, at 8:56 AM, Marv Gandall wrote:
> I agree with Doug's point, but don't see how it extends to the bank
> bailouts, which is what James is criticizing. A proper policy to me
> would have been to direct massive state lending and spending in the
> first place at household debt relief and the maintenance of jobs and
> mass purchasing power. How much persuasive evidence is there that
> the entire international financial edifice would have been brought
> down if a major bank like Citi, B of A, or even Goldman had been
> allowed to fail?
The bailout sucked as it was, but from the point of view of preventing systemic collapse, it was better than nothing.
It all depends on what you mean by "allowed to fail." An orderly liquidation/forced merger would have been disruptive but not fatal - but that would have been construed by the tea-heads etc. as a bailout. If you mean go down the drain, Mellon style, it would have been disastrous. The U.S. unemployment rate would be 20%.
Doug