Diane Ritter

Bailouts: Misunderstanding the Moral Hazard

You are absolutely correct! Close these institutions down. And we don't need any new programs or legislation to do it. This is the FDIC's job. The bankruptcy path of WaMu is exactly the approach that should be taken for the rest of these problem banks. The stockholders and the bondholders take a hit, maybe lose their investment entirely, and all the assets get sold at the REAL market clearing price. Which is the price someone is willing to pay for them on the open market. As soon as that happens, the crisis is over. Just like that.