That is what the most ardent supporters of free markets would push – however, the existence of asymmetric information makes this type of view a little strong. If there is no way to solve the information problem, then a solution with intervention could be better than a solution without it – however, I definitely wouldn’t use that as a general principle.

That is why economists have such different views – they hold different value judgments surrounding the extent with which asymmetric information is an important element of market competition.

Shouldn’t it be over to banks to prove they are healthy (physician heal thyself)? I’m assuming the bad meat mixed with other meat analogy holds. I think to get confidence back we want to see which banks survive the bad meat and which survive. Market failure will be cured when players realise they aren’t making any money?