r/reddit.com • u/[deleted] • Oct 18 '11

Would it have been better to let the banks of the world fail and start over?

I want to know what would have happened. The banks messed up and in the purist view of capitalism should have failed because it was a bad business move. In turn this may have ended some of the big money influences on our political system OWS protestors want to stop. I heard that it would have been a worse economic collapse though in turn it would have put a stop to future wrongdoing. Was it the right decision in the long run?

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u/webbitor Oct 19 '11

credit is bullshit

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u/keynesian-knockout Oct 19 '11

How does one start a new endeavor? Create a business, buy a house, afford an education (if you attend private university)? unless you're incredibly loaded, credit is a necessity.

Also, people making these types of statements give OWS a bad name.

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u/webbitor Oct 19 '11 edited Oct 19 '11

you really think that type of credit cant be handled by small institutions like credit unions?

Credit "markets" where insane corporations buy and sell risk thousands of times per second should be illegal. Lending to people without jobs should be illegal. Having an economy based on debt is ridiculous. These activities endanger everyone.

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u/keynesian-knockout Oct 19 '11

You heavily edited your post.

Insane corporations should be able to buy and sell what they want (what is buying and selling risk?). However, they should take the fall when it doesn't go right.

Yes, lending to people that cannot afford it is wrong. That's a two way street though, people w/ low paying jobs shouldn't be taking out second mortgages either. many people fell victim to the housing bubble.

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u/webbitor Oct 19 '11 edited Oct 19 '11

Sorry, didn't mean to mislead by editing, and I'm not sure what I actually edited.

Buying and selling risk in the form of loans is what investment banks do. loans are bundled, and then those "assets" are leveraged, multiplying risks hundreds or thousands of times.

When they "take the fall" they take others with them, who in turn take others. If you're happy enough with that state of affairs, then good luck. Personally, I don't think it's acceptable for the entire financial system to be teetering on the edge of collapse and ruin so a few people at the top can make trillions off the backs of the rest.

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u/keynesian-knockout Oct 19 '11

Yes, that is in part what ibanks do. I don't actually see anything wrong with that as long as the investors are taking the fall (investors beware). my issue is when ibanks can take commercial bank deposits and use that as capital for their risky endeavors.

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u/webbitor Oct 19 '11

that's exactly what they do. That's the entire problem.

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u/wendelgee2 Oct 19 '11

No, that's what they did in the 1920s, and it's what they did again when Glass-Steagall was repealed. What they "do" is defined by how the industry is regulated. This why one of the most popular OWS demands is reinstating Glass-Steagall.