http://venturedig.com/tech/the-year-banks-were-likened-to-smokers/ Capital, Creativity, Culture Thu, 29 Jul 2010 06:19:03 +0000 hourly 1 http://wordpress.org/?v=3.1.3 http://venturedig.com/tech/the-year-banks-were-likened-to-smokers/comment-page-1/#comment-841 Scott Wed, 18 Mar 2009 20:21:45 +0000 http://venturedig.com/?p=605#comment-841 Bernanke's video was actually very informative on 60 minutes: http://www.nakedcapitalism.com/2009/03/bernanke-on-60-minutes.html Bernanke’s video was actually very informative on 60 minutes: http://www.nakedcapitalism.com/2009/03/bernanke-on-60-minutes.html

]]> http://venturedig.com/tech/the-year-banks-were-likened-to-smokers/comment-page-1/#comment-840 brett scheiner Wed, 18 Mar 2009 20:06:23 +0000 http://venturedig.com/?p=605#comment-840 If you don't provide financing for big banks balance sheets (remember these are loans, guarantees and investments - not gifts), in a time of intense financial stress, numerous outcomes are likely all of which would be deeply debilitating to the eocnomy and employment picture. For instance, the financial system functions on overnight and short term lending. When the Bear and then Lehman troubles surfaced, overnight lending was either unavailable or existed at a frighteningly high price. Also, these large banks have tremendous counterparty risk - it is not out of the realm of possibility to think that an AIG bankruptcy for instance would require 10's if not hundreds of global banks to have to raise capital in a period where large amounts of capital are nonexistent (thus requiring government intervention). I have thought about the "Austrian" scenario a great deal lately - what if we did nothing? Unfortunately, this is not an option today. What is most important going forward is that regulations require any bank large enough to cause cracks system-wide, be regulated so that even a financial hurricane at one bank would be digested by the financial system reasonably well. If you don’t provide financing for big banks balance sheets (remember these are loans, guarantees and investments – not gifts), in a time of intense financial stress, numerous outcomes are likely all of which would be deeply debilitating to the eocnomy and employment picture. For instance, the financial system functions on overnight and short term lending. When the Bear and then Lehman troubles surfaced, overnight lending was either unavailable or existed at a frighteningly high price. Also, these large banks have tremendous counterparty risk – it is not out of the realm of possibility to think that an AIG bankruptcy for instance would require 10′s if not hundreds of global banks to have to raise capital in a period where large amounts of capital are nonexistent (thus requiring government intervention). I have thought about the “Austrian” scenario a great deal lately – what if we did nothing? Unfortunately, this is not an option today. What is most important going forward is that regulations require any bank large enough to cause cracks system-wide, be regulated so that even a financial hurricane at one bank would be digested by the financial system reasonably well.

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