I’m saying that panic will cause the financial system to collapse. I’m saying we should stabilize the system over the next couple of years and then find the political will to change legislation to prevent these kinds of crimes and bubbles, if that is even possible. We need to overcome this “too big to fail” policy that encourages risky behavior. I don’t know how to accomplish that.
But I would hope we could avoid creating a sudden financial panic when people and institutions drain money market accounts and lending compelely freezes up. A nice depression would certainly clean house among the weak companies, but painfully. I would hope we could restore confidence in the financial
system, stabilize it and only then start reforming this problem through legislation and by aggressively prosecuting the criminals at every level, from CEOs to brokers to lenders to raters appraisers.
“I’m saying that panic will cause the financial system to collapse. “
I would argue not, and that, of course, is simply our two differing opinions. I believe the markets want to profit and will adapt. There will be major losses as someone has to adjust for all that virtual money out there there never existed in the first place. I believe that will come from people simply having paper losses. My only hope is that people learn to pay strict attention to who has their money and how secure it is, but unfortunately I also think we will see some retirees lose their life savings. That is an issue that should be addressed.