Harvard Prof Niall Ferguson says our economic future will probably be worse now that (except for Lehmann Bros) taxpayers bailed out big (‘Too Big to Fail’) banks. As long as the big banks feel confident that they can count on the government… to bail them out they can more or less ignore calls to be more responsible in their risk-taking. Scary!

See http://www.abc.net.au/lateline/content/2008/s2695950.htm

More: ‘The real tragedy is that the failure of Lehman has left Wall Street… Read More’s survivors both bigger in relative terms and more secure politically. As long as the big banks feel confident that they can count on the government to bail them out – for who would now risk “another Lehman”? – they can more or less ignore calls for lower leverage and saner compensation.

http://www.facebook.com/l.php?u=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2 Ff96f2134-a15b-11de-a88d-00144feabdc0.html %3Fnclick_check%3D1&h=eff70a52df228c2ef5d2a9daf502a3c4

Then various Facebook friends:

If only we had learnt from Lehman that no bank should be “too big to fail”, we might still have a real capitalist system, instead of the state-guaranteed monstrosity that is the real legacy of last year’s crisis. If only.’

You have an economic and political fence to sit on. No bail out of the banks and industry(which I hold to) a deep depression large unemployment but a healthy and quick recovery. or bail out which leads to what we have dependant banks and industry but with smaller recession lower umemployment but long term weak economies. The US will still be on the back foot competing with the East

Yes you still have the big boys in the motor industry the banks etc. I am not blaming Obama but politics will no longer allow what happened in the 1930′s. I hold to the view that new innovation does not come from committee driven companies. The PC industry grew out of a few maverick nerds. We need this in the US or they will be a has been.

I think you are right. The best of American innovation came from visionaries, not committees.

Keynes never would have agreed with propping companies up. He saw pump priming as Govt. projects to reinvigorate the multiplier effect of supply and demand. Economic History demonstrates over and over that the life of corporations is quite short. Like nations they become hide bound, lacking in R&D, holding off competitors locally and overseas, … Read Moreresisting change. All of the robber barons have gone along with most of their empires. The only long term family companies left are Dupont and the Rothchilds.

I just can’t understand how CEOS can walk away from a bankrupt company and still collect a fat bonus. No worker who did shoddy work would be allowed to do that! And yet nothing has been done to even stop these guys from doing it all over again if they can get away with it. Few have even been jailed for allowing their company to go belly up. Did you see the DVD doco about ENRON? Unbelievable

Our problem is we let the banks determine themselves to be too big to fail, when we should have let the vicissitudes of reality demonstrate otherwise. After bailing out Wall Street, Main Street still suffers, and banks have yet to shrink one iota in size. Banks are still leveraging buyouts of their failing competitors while taking risky gambles … Read Morewith exotic monetary schemes in the same old race to see which executives can take home the most ungodly bonuses.

I have always maintained that nothing is too big to fail. Just ask the dinosaurs. Had we let all the banks and Wall Street fail back in 2008 when we first discovered that these elaborate derivative hoaxes were exactly that, one fiendish hoax after another where each hoax is more economically detrimental than the last, we’d be well up the road toward honest reform and well along with the prosecution of these gray flannel clad crooks. What could letting the banks fail have really hurt but banks? The economy is still in the toilet!

September 2009

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