[palmer]

Basically it would have allowed recovery. We would not have loans dying a lingering death on those bank balance sheets, they would have been liquidated along with the banks. Instead we have ridiculous low rates for related purposes: to allow politicians to borrow lots more money and to keep the big banks going with carry trade and other games.

The choice was to crash then and quickly recover with or keep the debt piling up and crashing later and more spectacularly. Thanks to TARP, Obama (part of the McCain's loss is from rushing back to pass TARP), foreign campaign money, etc we will have the later, larger crash. Probably default, maybe some hyperinflation along with that. After that the end of American military strength, etc.

[Toddsterpatriot]

Basically it would have allowed recovery.

Massive bank failures allows recovery? Why didn't that work in the 1930s?