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Their is every bit as much authority for taking all elements of any TBTF bank into a resolution regime as there was for the whole TARP proposal. But it might not have passed Congress so easily as congress would have been concerned who would step up with the contributions formerly made by institutions "in resolution." And there is no excuse for not requiring a 20-30% hair cut on debt and calling for a standstill on derivatives.

We are well past the time when action to protect the public from predatory financial corporations needs to take precedence over possible negative consequences to intervention. Voiding or unwinding many derivative instruments would at least force recognition and writing down of bad debt.  Until that happens we will continue to have the dance of the zombies. And changing regulations so as to allow credit default swaps to be honored for the 7/8ths of holders who could not produce a bond, the protection of which was ostensibly the purpose of the CDS, is like legalizing bank robbery ex-post-facto because the robbers are family. All we are doing with Bernanke's great rescue is postponing a final resolution and making that resolution more expensive and more devastating.

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

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Dec 20th, 2009 at 10:09:32 PM EST
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