Let Banks Fail (Stiglitz)

[katty]

more:
http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/4424418/Let-banks-fail-says-Nobel-economist-Joseph-Stiglitz.html

Professor Stiglitz, the former chair of the White House Council of Economic Advisers, told The Daily Telegraph that Britain should let the banks default on their vast foreign operations and start afresh with new set of healthy banks.

"The UK has been hit hard because the banks took on enormously large liabilities in foreign currencies. Should the British taxpayers have to lower their standard of living for 20 years to pay off mistakes that benefited a small elite?" he said.

"There is an argument for letting the banks go bust. It may cause turmoil but it will be a cheaper way to deal with this in the end. The British Parliament never offered a blanket guarantee for all liabilities and derivative positions of these banks," he said.

[Demeter]

1. All the King's Horses, and All the King's Men

Them banks have failed--they just won't admit it yet.

[bemildred]

2. The Ponzi-securities will never be made good.

The sooner this is recognized, the sooner we can start to work on rebuilding a sound economy by investing in real economic activity, jobs, production, etc., all the old boring work-related things ...

[Elidor]

3. YES!

I wish to subscribe to his newsletter. He makes a lot of sense. Thanks for posting this.

[Cronopio]

4. It's interesting the Stiglitz has modified his opinion on the subject at about the same time I have.

And in the same way. Last fall, I was for a 1993-Sweden-style bailout or an RTC-style bailout. Actually, I still believe that would work.

But as the months go by, it's becoming clear that the banks are just gaming the solution and cannot be made to work for the interests of the broader economy. It's proof to me that the banks know that their fake valuations can't be written down even with taxpayer help. So a more drastic step is necessary.

The US government needs to either completely nationalize the Fed or set up an alternative. A "good bank" instead of a "bad bank". Set up an alternative for customers so that the we can allow the banks go bust without killing the economy.

Millions of jobs are being sacrificed so that a few stockholders can retain ownership of their cash cows and do business with a dwindling customer base. They're taking themselves down and the country has cut the rope or our entire economy will go down with them.