8) Can we realistically solve the “too big to fail” problem?
We have to solve it. If we can’t, then nationalize these behemoths and pay the people who run them the same wages as everyone else who work for the government.
Fair call, economists, like most people, despise “socialism for the rich”. And honestly, if public institutions are always going to backstop them then nationalisation makes a lot of sense – and is how we felt here during some of the financial firm bailouts.
I can’t see the government letting banks fail, which is why I’ve been pro-deposit insurance recently (here, here). But even down that road, have a deposit levy. Also ask why we are going down that road, is it because we want a “risk free” rate of return for mum and dad investors no matter the cost … if that is the social preference Bair’s suggestion of nationalisation starts to make a lot more sense right 😉