Europe Bailing Out Banks - Moral Hazard
Posted: Thu Jun 07, 2012 11:22 am
Europe is now faced in Spain with the same problem the United States faced in 2008 and 2009.
Let the banks go bankrupt, wipe out the bank's shareholders, wipe out the bank's bond holders, and nationalize the bank before re-privatizing under very strict regulation as was done in the Great Depression in the U.S.A.
or,
Reward the stock holders and managers of the banks that ran their banks into bankruptcy by allowing them to keep control, use tax payer money to absorb all past and future loses at the bank, and allow the crooks who caused the problem to receive all past and future profits from the bank, as Presidents Obama and Presidents Bush both did in 2008 and 2009, in the United States.
Of course in the United States this free give away of tax payer money happened almost exclusively with "Investment Banks" which were not covered by government deposit insurance before the banking crisis in the United States and were not regulated like the non-Investment banks were prior to the crisis. These investment banks were deemed "to big to fail" and the moral hazards of rewarding the bad guys, giving the bad guy's a bonus, giving the bad guy's all future profits from the bounce, and giving the bad guy's a pass on criminal prosecution when fraud was involved in the bank looting were deemed the lesser four evils of five evils.
The current Spanish government is pointing out, correctly, that it does not have the ability to both borrow money & bail out the banks on the one hand, and stay in the EU under the current EU member country budget rules on the other hand. The conservative Spanish government is attempting to use austerity to solve the Spanish governments non-bank problems, but they point out nothing but leaving the EU can solve the Spanish problems if Spain must borrow money to bail out the banks itself and also meet the EU deficit rules for member countries.
Let the banks go bankrupt, wipe out the bank's shareholders, wipe out the bank's bond holders, and nationalize the bank before re-privatizing under very strict regulation as was done in the Great Depression in the U.S.A.
or,
Reward the stock holders and managers of the banks that ran their banks into bankruptcy by allowing them to keep control, use tax payer money to absorb all past and future loses at the bank, and allow the crooks who caused the problem to receive all past and future profits from the bank, as Presidents Obama and Presidents Bush both did in 2008 and 2009, in the United States.
Of course in the United States this free give away of tax payer money happened almost exclusively with "Investment Banks" which were not covered by government deposit insurance before the banking crisis in the United States and were not regulated like the non-Investment banks were prior to the crisis. These investment banks were deemed "to big to fail" and the moral hazards of rewarding the bad guys, giving the bad guy's a bonus, giving the bad guy's all future profits from the bounce, and giving the bad guy's a pass on criminal prosecution when fraud was involved in the bank looting were deemed the lesser four evils of five evils.
The current Spanish government is pointing out, correctly, that it does not have the ability to both borrow money & bail out the banks on the one hand, and stay in the EU under the current EU member country budget rules on the other hand. The conservative Spanish government is attempting to use austerity to solve the Spanish governments non-bank problems, but they point out nothing but leaving the EU can solve the Spanish problems if Spain must borrow money to bail out the banks itself and also meet the EU deficit rules for member countries.