Two economists recently authored a piece in the Wall Street Journal titled “We Can’t Subsidize Banks Forever.” It contained numbers and estimates from world banking officials and independent sources suggesting that the extent of liabilities of major lending institutions was so great that it would be impractical, indeed, crazy, to keep filling the black hole these outfits have dug for themselves.
It was a very good article. Its arguments were cogent and sensible. But of course such things no longer matter. Paulson and Bernanke put us on a slippery slope whose motive force is that saving the banks is the primary aim of government during this crisis, and if we somehow succeed in this saving effort everything will turn out fine. Geithner and Summers accepted the same basic logic and steepened this slippery slope still further.
Thus, no matter what, we must continue to save the big banks. Forget that old free market mantra about creative destruction, that the inept and outright stupid should fail so their places could be taken by their market betters. Big banks must not be allowed to fail is the new SOP. The economy can shrink. Unemployment can soar. Credit for little folks can be chopped away bit by bit. Most Americans’ lifestyles can contract in myriad little ways and increasingly in a myriad of bigger ones. But the big banks must not be allowed to fail.
We must bail them out endlessly no matter what. And as for everything and everyone else, well, we’ll just be jollied up with twaddle about “green shoots” and “stabilization” and “beating analyst expectations” and other variations of that old light-at-the-end-of-the-tunnel song.
Today, according to news reports, Bank of America will need another $34 billion on top of the $45 billion we’ve already given them to meet possible future problems. Citigroup reportedly will need another $10 billion. If the market doesn’t provide the money the government through sundry hack channel maneuvers will provide it. Our economic masters have decided this must be the case. And who are we to challenge their reputed wisdom?
Heck, maybe everything will really work out. Maybe a real recovery featuring the same old American standard of living is going to reappear by year’s end. Maybe Paulson and Bernanke and Geithner and Summers really do know what they are doing.
Oh brave new world, that has such economists in it! And if the meek really do inherit the earth along the way, that would be nice, too.