Saturday, June 9, 2012
Someone asked on Facebook: >>Remember when we were told we "had to" bail out the banks for the sake of our economy?<<
Yes, we did have to bail them out from their then certain collapse. Business depends on bank credit to do business. Everyday. Business depends on the bank payment systems to do business. Everyday. Imports and exports of goods depend on trade finance systems to do business. Everyday.
The commercial banking parts of today’s banks are the providers of those three functions. Functions which are, day to day, critical for our economy
If the banks had failed, how long would you have lasted with just the cash in your pockets? How long would you have survived if your grocery story didn't have any available credit to finance its inventory, and no payment systems to pay its suppliers? How long would you have survived if your gas station's supplier couldn't pay for imports of oil products?
We had to bail out the banks because our primary banking regulator, the Federal Reserve, was run by a libertarian for 2 decades leading up to the 2008 collapse, and libertarianism was what let the recently combined commercial and investment banks run amuck and gamble away the rent money, and the seed money, and your and my deposits.
Yes, the bailout sucked, and Wall Street got away with economic murder. The triumph of the Chicago School of Economics is that Obama and Congress kissed Wall Street ass. http://en.wikipedia.org/wiki/Chicago_school_of_economics
But it is mistaken to think each of us didn't have our literal survival at stake had the banks been allowed to fail.