Forget the Banks ... "If You Take Households In Total, They Are Also All Interconnected. They Are Also Too Big To Fail" → Washingtons Blog
Forget the Banks ... "If You Take Households In Total, They Are Also All Interconnected. They Are Also Too Big To Fail" - Washingtons Blog

Monday, August 22, 2011

Forget the Banks ... "If You Take Households In Total, They Are Also All Interconnected. They Are Also Too Big To Fail"


If the Banks Are Too Big to Fail, Why Aren't the American People?

In response to the disclosure that the Fed bailed out the Wall Street aristocracy, Huffington Post reports:

"It is a classic case of moral hazard," Dimitri Papadimitriou, president of the Levy Economics Institute of Bard College, told The Huffington Post.

***

Papadimitriou told The Huffington Post that the Fed issued many of its biggest loans during the Bush administration, and that "they didn't appear to have any difficulty supporting the financial sector, but very much difficulty supporting the real sector, households."

***

The TARP bailout, led by the Treasury, was the subject of much popular ire when it occurred, since it was seen as a case of the government throwing money at the financial sector at the expense of everyday Americans. Similarly, the Fed's $1.2 trillion in emergency loans were primarily aimed at keeping major financial institutions on their feet.

"One would assume banks are too interconnected, you have to help all of them," Papadimitriou said. "But if you take households in total, they are also all interconnected. They are also too big to fail."

Indeed, by choosing the big banks over the little guy, the government has doomed the economy to failure.

1 comment:

→ Thank you for contributing to the conversation by commenting. We try to read all of the comments (but don't always have the time).

→ If you write a long comment, please use paragraph breaks. Otherwise, no one will read it. Many people still won't read it, so shorter is usually better (but it's your choice).

→ The following types of comments will be deleted if we happen to see them:

-- Comments that criticize any class of people as a whole, especially when based on an attribute they don't have control over

-- Comments that explicitly call for violence

→ Because we do not read all of the comments, I am not responsible for any unlawful or distasteful comments.