Fed in AIG rescue - $85B loan

[ajmccarrell]

Originally Posted by strandinthewind

Your argument is flawed because if we let the banks fail, which is what you suggested when you said "but as far as the bank itself goes, let it crash" - any new insitutions will be hard pressed to lend to anyone without sterling credit and cash in the bank. I suggest those people will be few and far between. Moreover, if a significant number of other banks are allowed to fail, the baks you listed will likely fail as well.

You are looking at it ceteris paribus. If the banks fail, the prices will fall to the point where regular joes can buy a house again. Basic supply and demand here. I'm not saying that some eggs won't be broken.

[strandinthewind]

Originally Posted by ajmccarrell

You are looking at it ceteris paribus. If the banks fail, the prices will fall to the point where regular joes can buy a house again. Basic supply and demand here. I'm not saying that some eggs won't be broken.

I agree prices will fall. But and again, who is going to loan them the money to buy the house if all the baks failed and govt. can no longer help out because it is too busy trying to figure out how it is going to pay the FDIC bill for the failed banks?

The answer is it is cheaper for the govt. and the American people to stop the failing of the banking system by extending lifelines and brokering deals like the one Bear Stearns got.