IN the end, the Resolution Trust Corporation worked.
If we can do this like we did that, it’s not a bad solution.
Of course, there are no details.
There is no ideal solution, but the alternative of letting the banking system to collapse is too scary to contemplate.
Those who think letting the banking system collapse will return us to old fashioned capitalism are dead dead wrong. It would instead lead to a new wave of FDR style socialism.
Worked for who?
Could someone give a synopsis of how RTC functioned and whether or not it worked?
TAXPAYER = SQUEAL LIKE A PIG!!
Let me ax you a question.
How do you suppose this wonderful new resolution trust type company will pay for all of the toxic debt that it will be "buying" from Wall Street?
Who will determine the prices that this "company" will pay for it?
This is NOTHING but a bailout. A massive bailout that will cost The Taxpayers.
The Gov't can either directly bail out each institution piecemeal, as it has for Bear Stearns, IndyMac, Fannie/Freddie, AIG... etc
OR!
It can print up a bunch of money and "fund" this neat new "resolution corporation" to buy up the sh!t within each companies portfolio.
Either way, by any name you want to call it, it's still a bailout. And we are all getting screwed.
The details are found in your paycheck.
Seriously. Who the heck do you think is going to actually BUY the crap off of these balance sheets? The Treasury-funded Federal Reserve. Who funds the Treasury? YOU DO!
The big difference with the S&L RTC is that the banks were already in default and closed. These securities need to be BOUGHT from the financial institutions that are holding them, and even at that, probably with a sizable haircut.
And it might not have been needed, if in the beginning, the Government hadn't run up inflation thus breaking the business model of the S&Ls (long term loans from short term deposits), which business models they were bound to by regulation.
And it might not have been so bad if the S&L's hadn't been forced to get rid of their junk bonds at fire sale prices, by government fiat. The only folks who lost money on the junk bonds were the S&L who were forced to sell quickly.
This time, it will work again (with a generous definition of 'work'). But the cost will be either taxes or inflation (likely both). A couple of trillion dollars will be lost, and nobody really responsible will go to jail.
Eventually, some people are going to pat themselves on the back for a job well down in solving this problem. They are the same folks who tell me inflation is down, even as my July 4 steak was $8/lb this year, and that at Costco.