Paul—your blog highlights the issues facing the global financial system at the moment.
As painful and as risky as it is, trying to salvage the existing financial system is really the only solution. What you propose—to let the Financials sector go bankrupt and to start up some sort of government SuperBank sounds incredibly dangerous to me … and it’s not far from the direction the European governments seem to be angling toward according to this morning’s paper.
Do you really trust governments that have been bungling their way through this crisis to determine who should be loaned money at what rates and for what purpose? If you want to head straight back to the stone ages economically, that would seem to me to be just about the right prescription.
Most critically, I think it is crucial to keep the perspective that we are by NO MEANS out of the woods yet, and credit markets look very bad still, and more major banks could fail.
I DO think governments need to continue to press forward in the Financials sector. It is an ugly, ugly situation, but we must have a dynamic and competitive Financials sector for the economy to work the way it should. And bold moves toward nationalization make me very, very nervous, and make me less optimistic about the path for Europe. Clearly, America has got to lead the way. And hopefully we’ve got the competence and the determination with the new administration (Welcome, President Obama!) to make that happen.