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If we set up new banks and permit them to behave the way we permitted the existing banks to behave, sooner or later they will recapitulate a banking panic
Agreed, of course, and in most of my statements of the proposal I have emphasized the need for a return to something more like 70s regulations.  But you would only respond to some tertiary point if at all to those comments. :-)

... if we remove the license from the current banks to behave the way they have been behaving, they will go back to the boring business of banking, again.
Agreed, but they would still be saddled with the bad assets they acquired during the bubble, so new regulations alone are clearly insufficient, unless you advocate that the public, via the government, relieve them of those bad assets.  While they are insolvent they remain impaired in their ability to extend needed credit.

New banks, created as I propose, and operating under competent regulatory schemes, would be able to finance ongoing economic activity and pick up the slack left by impaired banks.  Why is this not an appropriate thing for Congress and the Administration to do in the public interest?  I can see that it would be disadvantageous to existing banks, especially those impaired by toxic assets. TFB!  I can also see that this would, in effect, free the Main Street or real economy from being held hostage to Wall Street, as I believe Paulson is doing.  I can see that it would be strongly opposed for those reasons alone.  Can you comment on the substance of the proposal.  I am particularly concerned about any specific that would render it unfeasible and about consequences I don't foresee.

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

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Oct 2nd, 2008 at 11:22:37 PM EST
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