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Originally Posted by sebastian_dangerfield
And we didn't have to nationalize the banks. We could have thrown them into some special receivership as a condition of the bailout.
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This is a distinction without a difference.
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What fails needs to be left to fail or go through bankruptcy.
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It's strange how this became a popular opinion immediately after definitive proof that it's a fucking horrible idea. We let Lehman fail and it started the biggest bank run in generations, which in turn created other banks (and others) who were insolvent on paper pretty much entirely because of the panic (i.e., they held assets that were worthless at the time but proved not to be entirely worthless). We should not do that again, even if we need a way to wind down a Lehman without straight up bailing it out.
And, actually, we had a way except that the Treasury secretary decided to try your way instead of further twisting arms to get someone to absorb Lehman and avoid the collapse.
