Re: [Pen-l] Nationalization of banks with haircuts

[Shane Mage <shmage@xxxxxxxxxxxx>]

On Jan 23, 2009, at 6:18 AM, Julio Huato wrote:

Shane Mage wrote:

And what, pray tell, would be the *social* cost of

declaring bailout-worthy banks bankrupt and continuing

their operations with the Treasury managing them as

receiver-in-bankruptcy?

Please read what Fred, raghu, and I have been discussing.  The three
of us assume that the goal is not to prop up the bankers, but the
banks or -- more precisely -- the activity of banking (credit).  It's
not the same thing.

The Treasury does not have less capital than the banks. Treasury civil servants are not more incompetent than bank executives.  So it would have no negative, only positive, effects on "the activity of banking."

Again, what do you mean by "social cost?" 

Shane Mage

This cosmos did none of gods or men make, but it

always was and is and shall be: an everlasting fire,

kindling in measures and going out in measures."

Herakleitos of Ephesos

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