{"id":4803,"date":"2008-09-14T21:19:28","date_gmt":"2008-09-15T04:39:16","guid":{"rendered":"http:\/\/www.amptoons.com\/blog\/archives\/2008\/09\/14\/quick-question-for-the-econ-majors-out-there\/"},"modified":"2008-09-14T21:19:28","modified_gmt":"2008-09-15T04:39:16","slug":"quick-question-for-the-econ-majors-out-there","status":"publish","type":"post","link":"https:\/\/amptoons.com\/blog\/?p=4803","title":{"rendered":"Quick Question for the Econ Majors Out There"},"content":{"rendered":"

Is it a bad thing if our banking system collapses<\/a>?<\/p>\n

In one of the most dramatic days in Wall Street\u2019s history, Merrill Lynch agreed to sell itself to Bank of America for roughly $50 billion to avert a deepening financial crisis, while another prominent securities firm, Lehman Brothers, hurtled toward liquidation after it failed to find a buyer.<\/p>\n

The humbling moves, which reshape the landscape of American finance, mark the latest chapter in a tumultuous year in which once-proud financial institutions have been brought to their knees as a result of hundreds of billions of dollars in losses because of bad mortgage finance and real estate investments.<\/p>\n

But even as the fates of Lehman and Merrill hung in the balance Sunday night, another crisis loomed as the insurance giant American International Group appeared to teeter. A.I.G. sought a $40 billion lifeline from the Federal Reserve, without which the company may have only days to survive.<\/p>\n

The stunning series of events culminated a weekend of frantic around-the-clock negotiations, as Wall Street bankers huddled in meetings at the behest of Bush administration officials to try to avoid a downward spiral in the markets stemming from a crisis of confidence.<\/p><\/blockquote>\n

This is, of course, all the fault of the liberals. If they would just force people to deal with the consequences of their actions rather than giving them a safety net to fall back on, people would work harder.<\/p>\n

Kidding! You’ll never see an argument like that from the right. Why, it’s expected that we’ll bail out the billionaires. Gotta do it, the economy might melt down otherwise. It’s the poor who have to be dealt with harshly. They don’t have lobbyists.<\/p>\n

This is, of course, an unmitigated disaster. The Fed has already spent billions bailing out bad actors in the economy, and they’re at a point now where they really have to keep it up in order to keep the banking system from collapse. Of course, all these banks were unregulated, and in principle that should mean we let ’em fail — you see, unregulated markets operate with no safety net. Regulation gets the government involved, but it adds in a safety net — think the FDIC, for a good and positive example.<\/p>\n

Nouriel Roubini thinks the Fed has to stop bailing out moral hazards<\/a>. They do, but they probably won’t start now. In a just system, we’d let the billionaires go under here, and pick up the pieces afterward. But instead, we’ll whine about how the Democrats want to slightly raise taxes on the rich and add a few *shudder* bureaucrats to look into what the banks are doing, because that’s just terrible for our free market system. And so it goes.<\/p>\n","protected":false},"excerpt":{"rendered":"

Is it a bad thing if our banking system collapses? In one of the most dramatic days in Wall Street\u2019s history, Merrill Lynch agreed to sell itself to Bank of America for roughly $50 billion to avert a deepening financial … Continue reading →<\/span><\/a><\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[25],"tags":[],"class_list":["post-4803","post","type-post","status-publish","format-standard","hentry","category-economics-and-the-like"],"_links":{"self":[{"href":"https:\/\/amptoons.com\/blog\/index.php?rest_route=\/wp\/v2\/posts\/4803","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/amptoons.com\/blog\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/amptoons.com\/blog\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/amptoons.com\/blog\/index.php?rest_route=\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/amptoons.com\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=4803"}],"version-history":[{"count":0,"href":"https:\/\/amptoons.com\/blog\/index.php?rest_route=\/wp\/v2\/posts\/4803\/revisions"}],"wp:attachment":[{"href":"https:\/\/amptoons.com\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=4803"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/amptoons.com\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=4803"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/amptoons.com\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=4803"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}