October 23, 2010
Joe Nocera has a nice discussion of the foreclosure scandal in the NYT. However at the end he decries the fact that if we require Bank of America and other big banks to adhere to the law, then the losses could be so large that we would need to bail them out again.
The part missing from this story is that we could have bailed the banks out with conditions that were so onerous the banks would not be happy about the bailouts. We could have wiped out the shareholders, forced the creditors to take large haircuts and also put real caps (instead of the idiot versions intended to fool gullible reporters) on executive compensation.
The reason that these conditions were not imposed in 2008 is because the of the power of Wall Street, not the underlying dynamics of the situation. Nocera should have figured this one out by now.
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