Apr 13 2009
Taking Over the Banks Made the Crisis Worse
Nouriel Roubini aka Dr. Doom said taking over the banks made the crisis worse:
“The institutions are insolvent,” Roubini said in a Bloomberg Radio interview. “You have to take them over and you have to split them up into three or four national banks, rather than having a humongous monster that is too big to fail.”
And that is the part that annoys me about this whole situation; the banks are insolvent. A less scary way of saying their bankrupt. So instead of taking them over, wiping out the shareholders, replacing management and breaking them up into smaller banks - we keep throwing (taxpayer) money at them hoping that somehow we can buy them out of the mess they created.
I feel like I’m living through some crazed episode of the Twilight Zone where all of the people in power have turned into some crazed loons who are incapable of seeing the truth and live in a constant state of denial. We know what to do when these situations happen. We did it with the Savings and Loan debacle of the eighties. But not this time. This time banks are too big to fail. However, they are too big to fail because we did away with the laws that would have prevented this from happening in the first place. It’s all a circular mess.
Just like we know how to handle banks that are insolvent, we know what happens when we don’t - we just have to look to Japan for that. In the end we’re headed for a Japan style lost decade and it will be no one’s fault, but our own.
