Bank Strategy: Nothing New?
By Arnold Kling
The Wall Street Journal quotes a joint statement by U.S. bank regulators.
The U.S. government stands firmly behind the banking system during this period of financial strain to ensure it will be able to perform its key function of providing credit to households and businesses. The government will ensure that banks have the capital and liquidity they need to provide the credit necessary to restore economic growth. Moreover, we reiterate our determination to preserve the viability of systemically important financial institutions so that they are able to meet their commitments.
I read this as a continuation of the policy of propping up zombie banks. My instinct is that it will extend the crisis and put large amounts of taxpayer funds at risk.
It seems as though our government has an unlimited supply of charity to offer speculative homebuyers and overly-aggressive banks. I personally resent paying for my share of that charity. And I do not think that the positive externalities from that charity are nearly large enough to justify calling it a public good.