It's in the self-interest of the banks to stay alive:
"The battle lines over how to deal with the banking crisis have been drawn. On the one side are those who know what needs to be done. On the other are those who know what needs to be done -- but won't admit it."The assets on the banks' books, if there is no market value, need to be recorded at 0. That means they will be insolvent and must be taken over. Don't let these toxic assets cause toxic thinking. As Martin Wolf of the Financial Times sums it up: "Admit reality, restructure banks and, above all, slay zombie institutions at once.
These banks have proven they do not know how to run and the people running them are not qualified. Why give money to the same people and management who ran the bank into the ground? It makes absolutely no sense. These historic failures are game-changers. We can't go back to what was because it did not work.
Arianna adds:
"This tough love for bankers is being promoted by everyone from Nouriel Roubini, Paul Krugman, and Ann Pettifor to Niall Ferguson, the Wall Street Journal, and Milton Friedman's old partner, Anna Schwartz, the co-author of his seminal work, A Monetary History of the United States, 1867-1960. "They should not be recapitalizing firms that should be shut down," says Schwartz. "Firms that made wrong decisions should fail."A sports analogy would be: not that the Yankees had a bad season and finished last, but the unimaginable happened, the Yankees went out of business. They invested in risky players who never became Big Leaguers and they had so much debt, they failed to make it to the next season. When franchises don't do well, they change cities, they are sold. It happens all the time.
We have to end this denial in our society, let the banks fail, and let new ones take their place. That is free market economics at work.
Source: HuffPo
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