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It is so much more politically palatable to guarantee saver's deposits (that's you and me) than to bail-out banks with their massive bonuses and dodgy practices - that's them, the elite.

But to guarantee corporate deposits and debt is a bailout of the bank management and the shareholders and the creditors.

The proper course of action is to take over the bank as it fails: dismiss the management, appoint an administrator, guarantee the deposits and wipe out the shareholders (likely) and creditors (less likely).

But you can't do that when the management have political connections and the government thinks it needs to keep those creditors happy to preserve the Foreign Direct Investment. In fact, as soon as any crisis action is taken mobile capital will flee regardless.

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith

by Migeru (migeru at eurotrib dot com) on Mon Oct 6th, 2008 at 12:15:33 PM EST
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