Bank Failure!

This article is about the banks that have failed and the Obama’s administration trying to revive them. The author claims that the administration’s assumptions are invalid, and he highly doubts that it will work. Over time, the government could finance over a trillion dollars for these banks. The first assumption the government makes is that the loans will be repaid back to them with interest; however, there is no guarantee that the banks will recover again. The government offers loans that are enormous, so even if the banks have another loss then the government’s purchased assets would become a huge loss. The author asserts that if the banks start to work again then it will just be a transfer of money from the government to the bank investors. The editor wants the bank rescue to be done on known situations instead of assumptions that are currently being made by the government.

            This article has a different view than other articles about the banks and their rescue by the government. I actually agree with the author here because so far the government is expecting that when the banks come back to full force then they will get their money back with interest. That is not the case because it can very well continue to fail, thus leading to huge government losses. It also seems like the banks are not properly spending the money where they should (For example: AIG). Some banks spent the money on super bowl parties, huge bonuses for CEOs, etc. I do believe the author’s idea of separating the working and failing banks, firing the executives of the failing banks, cleaning out the shareholders, and the government trying to rework these banks is the best way to go about it. Its safe and the risk involved with it is much less than the risk the government is taking right now.

http://www.nytimes.com/2009/03/24/opinion/24tue1.html?ref=opinion