Reply to post: So many wrong ideas to make it sound we can do nothing

So many wrong ideas to make it sound we can do nothing

Wow. Rolling out the Loanable Funds Theory, eh? A real Upton Sinclair effort there.

This has been shown by the various money measures to be be complete ass backwards. Banks make loans, and if they don't have enough reserves they borrow, first from other banks (ah, the Libor), then from the Central Bank. They make money of the spread from the loan to what they borrow.

Next, when a bank is illiquid, "Bagehot's Dictum" is supposed to apply - lend freely against good collateral at penalty interest rates. What was done for the GFC was the only the first part.

Next, apart from a few minor lackeys, no high ranking officials and their ilk have won an orange jumpsuit have paid the price for the GFC, even though scandals of Libor rigging, FX rigging, mortgage fraud, asset mismanagement, etc. have had billions (that is with a B) been paid in fines. Immaculate crimes.

Compare with with the S&L crisis from the late 1980's where over a 1000 folks got prison time (try Charles Keating for a start).

So no, none of this has to be. You can handle illiquid banks, but make sure the incentives kick (like charging high interest) to dissuade bad behaviour.

Then, for crimes, actually send folks to prison. Versus say Eric Holder saying that following up crimes at large banks may have an economic impact. Um, no, again ass backwards.

But articles like this make it sound like we are main street is impotent. It is not, but we have to hold politicians feet to the fire to get this rolling.