[Pearls Before Swine]

Crony or no crony, the US needs bank consolidation. No other major country has this many banks. It is true that the healthy banks have to get healthier, and the bad ones absorbed. When the bad ones go under, their owners (investors) get trashed, as they must.

The bad part comes in if there is preferential treatment to specific entities that the administrators have ties to. That only gets sorted out in retrospect, and only sometimes.

Without this program (which I'm not entirely happy about) there would still be bank consolidation, only with more economic disruption during the settling period.

[mbj]

> US needs bank consolidation.

Just so I understand correctly, you’re saying what we need is /more/ banks that are “too big to fail” as opposed to better risk management and less underwriting fraud by places like AIG?

[arthurus]

The economic disruption of flooding massive federal money into the system will prolong the problem and make it worse. It is an inefficient allocation of resources. It is throwing good money after bad. It’s intended primary effect is to insulate bad managers from the consequences of their bad management and make sure that they all get paid. The rest of us will be doing the paying, especially with the inflation tax as the money we hold becomes ever more worthless. Its primary real effect is inflation. We are looking at Weimar.