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Thank you for your response, Bruce.
...it seems likely it would be more capital overall required to capitalize these banks sufficiently that they are not dragged down as the existing banking system collapses around them...
I fail to see how it is less expensive to provide capital to new, uncontaminated banks than it would be to first cover all of the losses and bad bets of existing banks and then provide the capital to re-capitalize them. And how would anyone know if all the bad assets had been identified when they were re-capitalized.  Please explain.

I don't understand why new banks would not be more resistant to being dragged down by existing banks than are existing banks.  All of their business would be conducted under more conservative banking regulations and there should be a lot of very experienced, sadder but wiser bank officers available to staff such institutions.  In the current climate most such officers would be very glad to have good paying employment, acutely aware of the consequences of playing fast and loose with the rules and constrained with the possibility of legal consequences for future bad behavior.  They might no longer have the prospect of doubling their personal wealth in three years from their work, but they would have good salaries and benefits.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Oct 3rd, 2008 at 12:03:09 PM EST
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