Were Wall Street Banks Bailed Out?
17th December 2011
Of course they were! EVERYBODY knows THAT!
Yeah, well, at one time ‘everybody’ knew that the world was flat, too. ‘Everybody’ can be wrong, and frequently is.
It is common to see history rewritten before our eyes. Still, even in that context, the myth of the Wall Street bailout is remarkable.
And depressing. As Some Famous Person once said, nobody every lost money by underestimating the intelligence of the American people.
Banks in a fractional reserve system are uniquely fragile. They don’t actually “have” any of their “own” money, of course; they have mostly other people’s money–deposits, CDs and wholesale funds (interbank loans and other debts) on a relatively small capital or equity base to fund their assets (loans). NO bank is or can be solvent if the public thinks it is not. That’s why a run is a self fulfilling prophecy.
This applies to governments, too, a fact that Greece and Italy are having their noses rubbed in even now.
December 19th, 2011 at 07:04
The Famous Person was H.L. Mencken.