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Perhaps someone can explain to me why we need all these new laws all of a sudden to facilitate the bailouts?

I can understand why you can't necessarily know in advance which banks precisely will need to be bailed out. But if banking is such a vitally important strategic sector, then why is the safety net not put in place before the chips hit the table?

I mean, anybody with eyes and ears who hasn't been hiding under a rock on the dark side of the moon and maintained total radio silence should know that the banking sector can fail and can fail catastrophically. If for no other reason, then because the US has had at least one previous round of crisis over the past 12 months.

So why are laws being cobbled together in the last moment to cover an event that has been in the cards for the last twelve months at least?

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Oct 1st, 2008 at 10:08:06 AM EST
Because discussing laws to enable a bailout can trigger a bank run even if the fundamentals are sound?

It's the magic of fiat money - it's all a confidence trick so you have to maintain the confidence.

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 Wed Oct 1st, 2008 at 10:10:00 AM EST
[ Parent ]
I'm tempted to say "so what?" If the fundamentals are sound, a bank run would be a liquidity crisis, not a solvency crisis, right? So we'd have to provide liquidity (with strings attached, of course, but we're assuming that things are properly planned for ahead of time, right?). But that doesn't cost the taxpayers money or debase the currency, does it?

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Oct 1st, 2008 at 10:44:04 AM EST
[ Parent ]
Market fundamentalists have denied until banks actually crashed that there was any risk of banks crashing (remember: markets allocate risk better!), so it was not necessary to plan for that, the market would take care of it.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Wed Oct 1st, 2008 at 11:18:01 AM EST
[ Parent ]
The market is taking care of it, all right.

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 Wed Oct 1st, 2008 at 11:29:16 AM EST
[ Parent ]
Let's take this once more for Crown Prince Knud. You're saying that because the market fundamentalists denied that there was a potential problem with the banking sector, I now have to accept that the government burns the midnight oil to make laws that there will never be sufficient time to debate or deliberate or even properly consider, in order to respond to the cries from those same market fundamentalists that we must save the banking sector?

headdesk

Can we please bring out the guillotines now?

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Oct 1st, 2008 at 11:39:11 AM EST
[ Parent ]

Can we please bring out the guillotines now?

IF I understand your meaning ...

Hey, JakeS.  I'm the resident ET violent loonie.  Work your own side of the street. :)

They tried to assimilate me. They failed.

by THE Twank (yatta blah blah @ blah.com) on Wed Oct 1st, 2008 at 01:10:34 PM EST
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