Notes &
We had no choice but to try to stabilize the system because of the implications that the failure would have had for the broad economic system
Ben Bernake defending the AIG bailout
I beg you, Dr. Bernake, what are those “implications” for the “broad economic system.” S.P.E.L.L. I.T. O.U.T. for me. I haven’t seen anyone attempt the thought experiment; only heard people (usually these guys) telling us why we “can’t even imagine the possibility.” What’s happening now (frozen credit, broken banks, with no light at the end of the tunnel) seems pretty bleak for us to simply accept as better than the indescribable alternative. Why can’t we let AIG, it’s string of counterparties (big banks, and ultimately, their creditors) take the hit themselves. The government can secure deposits directly rather than save everyone on the way down to the depositors. What’s wrong with that scenario? Again, please, S.L.O.W.L.Y. because I get that this is all very complicated.
