HARM

Let the Market Sort Itself Out

Are *you* being serious Whidbey, or just posting a pre-emptive snark mimicking the "careful what you wish for" Wall Street crowd?

Solvent banks will never stop lending to creditworthy borrowers. A bank borrows short and lends long for profit. Any bank that does not lend has no reason to exist. Much in the same way that a homebuilder that does not build homes will not exist for very long.

Creative destruction during bear markets is just that --destruction of bad businesses and lenders that had poor business models, underpriced risks, and based profit expectations on flawed thinking (such as "RE only goes up", or "borrower creditworthiness doesn't matter, we have CDOs now").

When the maket punishes such flawed business models during the inevitable post-bubble implosion, there is always some pain, yes, but it is mainly concentrated among those who participated in the mania (unless, of course, the government does something stupid, like bailing out bad lenders and speculators). Once the bad actors and speculators have been flushed out of the marketplace, everyone else --solvent, prudent lenders and borrowers-- will be much better off.

Beware of people peddling fear with one-liners such as "Careful what you wish for". What they really want is "Privatize profits, Socialize losses".