>Many bank are disputing that they would've failed. That's the point. They were never given the chance to succeed without government "help".
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>You gave Iceland as an example. That's what happens if banks are allowed to "succeed" when there is lack of liquidity and loss of confidence. If some of these US bankers truly believe they were immune to these sorts of runs despite holding <10% of deposits as cash, they deserve an audit. Everybody here will understand why it would not be possible to find the other 90% to satisfy panicked depositors when there is no liquidity in the market!! The FDIC would have been forced in intervene and take over bank after bank. If that was their end-game, why didn't they just sit back and let the clever bankers succeed?

If the FDIC takes over they have specific rules governing their process, including rule 1 : attempt to find a buyer. If banks are forced to accept TARP then the Congress, the Administration and the FED get to make the decisions and they can change the rules along the way.

>The "draconian" legislation is here. The federal government has assumed a controlling interest in private entities. It's not limited to banks and AIG. They're looking into all aspects of private business for takeover. Geitner has already mentioned insurance publicly. Congressional representatives have spoken publicly about energy and health care. There is no limit to the potential takeover based on the current model.
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>All those sectors need to do is prove that they are running an efficient market- IOW providing the best service at the best cost for the citizenry- and government will struggle to nationalize.

The rules continue to change as the State dictates. The market is skewed by regulation, fees, subsidization and in the case of health care now and energy in the 70s, government mandated price fixing.

>If these industries can't demonstrate that, presumably because they're actually running the show for their own selfish ends,

Of course they're in it for their own selfish ends. Individual liberty to do as one chooses with the fruits of one's own labor is the heart of free-market capitalism.

>then that's their own fault and it is government's job to step in and restore efficiency from society's perspective. That's assuming that we agree that the market, currency and trading rules are set up and enforced by society for its own benefit?

The rules need to be set up to enable the individual to succeed regardless of the society as a whole. When decisions are made for the "greater good", "society", "community" or whatever term you choose to soften the tyrannical rhetoric, individual liberty is surrendered to the State.

>I've never claimed otherwise. In fact I've mentioned it before that they cannot be trusted and we've known that for centuries. I've posted before about Glass-Steagal.
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>We agree that bankers cannot be trusted and require supervision. But that does not mean the devil/government is responsible for bankers' failure. As I keep saying, lack of a G-S bill elsewhere in the world did not lead to a financial collapse.

I disagree. There are banks failing all over the world due to subprime lending and housing backed derivatives. Had other nations the regulatory equivalent of G-S, perhaps their commercial banks wouldn't be failing due to those investments.

>In the case of your Iceland example, bankers accumulated impossible liabilities to show a bigger profit, meaning that a bank run from the UK was enough to tip them over. In the end, impossible liability is what subprime was about as well. The bankers did it both times.

This helps to make my point about other countries needing a G-S.

>To blame government is like blaming government for 9-11 because government allowed airline and airport security to become too lax.

You could've mentioned:
Not killing/capturing OBL when they had the chance in 1996.
Gutting the military and intelligence agencies from 1993-2000.
Prohibiting pilots from being armed
Lack of cockpit door lock regulation

All of which are the equivalent of the CDSs, interest only loans, and creative derivatives which followed the initial governmental decisions which enabled them.

The root cause of 9-11 lies with Saudi Arabia's Wahhabist teachings. Just as the root cause of the financial meltdown lies with bad decisions by our elected representatives.

>So if I follow your thought process...The banks should've bailed out the insurance company from which they're collecting insurance for failed investments?
>
>Without the mortgage insurance dominated by AIG, banks are required to hold larger reserves as cash. Which they could not have achieved in the illiquid market, meaning that even the best-run banks would be on the road to default.

The best run banks did not get involved in the subprime debacle and are currently doing quite well, including a number which are expanding by purchasing FDIC takeovers.

>This is why AIG offered itself to the market in the first instance. The market model should have seen the banking industry working fast to prop up AIG for their own survival. Instead they ran away which left the US sector heading towards an Iceland experience. Thanks, guys, and how horrible the government was to intervene after that.

This makes no sense. If a bank has insurance against its bad loans and then both the loans and the insurance fails, where is it to get the money to "prop-up" the insurer? To say nothing of the catastrophic suggestion that they bail out the very insurance company that just failed to provide the insurance they had purchased. Anyone floating that idea has no business being within shouting distance of a financial boardroom. Congress, the Whitehouse and the Treasury sure, but not a financial boardroom.

>We're not talking about a small shareholding in the common stock sense. We're looking at specially created new form of preferred stock specifically for the federal government which subjects the companies to all manner of governmental intrusion into private business.
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>Professional investors injecting $$ into an illiquid business often require a special class of shares that gives them priority and/or a guaranteed return as well as control over payments to other stakeholders, audit rights and even Board membership. It's not nice to be on the receiving end, but it's to be expected if you're illiquid.

I know exactly how it works as I've been on both ends of a preferred stock purchase and believe me it's much better to be the investor as opposed to the recipient. However, that's not the case as those purchases involve both parties freely agreeing to the terms ahead of the purchase. TARP was forced on some banks and the rules keep changing.

>Actually the sorts of deals available to private businesses needing $ were made a lot worse by the crisis though the devil/government has again stepped in to incentivize loans to help businesses succeed.