Treat Banks As You Would Treat a Heart Condition
People often ask me why we can't let banks and organizations such as CITI and AIG just fail. The answer is simpler than most of us would expect. First it is important to think of the economic system as an organism comprised of a series of interrelated systems similar to the human body. The banking system is the circulatory system of the economy; Money is the blood of the economy. If an artery, such as a major bank, gets clogged some other major organ may fail or be severely impaired. We can equate the failure of major financial institutions to the clogging of arteries that lead to cascading organ failure. Clogging of the renal artery can lead to kidney failure. We can survive with one missing kidney but a loss of both will kill the organism. A bad kidney can lead to a bad liver which can affect other organs. CITI or AIG going under can lead to a cascading collapse of other banks and financial institutions to the extent that the whole organism we call an economy can die. Therefore it is necessary to prevent the total failure of these organizations.
However, this does not mean that we must preserve the plaque that got us into trouble to begin with. Just as arteries can be opened using stints and plaque can be reduced with Statins, financial institutions may need a complete change in the clogging agent known as outdated management. In addition, a pacemaker (regulatory agency) and regular check-ups (audits) may need to be added to keep the system healthy.
And don't forget, this organism encompasses the entire wold. From Sidney Australia to Tristan De Cunha. And they don't have an FDIC.
C
March 7, 2009 5:31 PM | Reply | Permalink
This post is giving me chest pains.
March 7, 2009 6:35 PM | Reply | Permalink
Don't let Econmavin give you a coronary. He's analysis is very biased. Republicans are to blame for the bloated national debt. Never anybody else.
It's scary that they let someone so partisan teach at the college level
March 8, 2009 11:25 AM | Reply | Permalink
I was merely countering the Republican mantra claiming they are fiscally responsible. You have learned well from Carl Rove: Attack the messenger when you have no way to attack the message .
March 8, 2009 8:07 PM | Reply | Permalink
I can certainly debate the message. I'm just not sure what your message is because this post was very vague other than to say we have to support Citi and AIG.
And frankly I don't care who claims they are fiscally responsible and who doesn't make that claim.
If you're talking about spending, the simple truth is that we're spending too much and can't afford it.
March 8, 2009 10:58 PM | Reply | Permalink
"Everything with me is either worship and passion or pity and understanding. I hate rarely, though when I hate, I hate murderously. For example now, I hate the bank and everything connected with it.... "
— Anaïs Nin (Henry and June: From "A Journal of Love" - The Unexpurgated Diary of Anaïs Nin)
March 8, 2009 4:43 PM | Reply | Permalink
co-sign, ma'am. They are still doing all the bad things that they should stop doing, too.
March 8, 2009 4:54 PM | Reply | Permalink
Bad Metaphors abound. I wrote an essay on my website called "Bad Metaphors" and linked to James Galbraith's article that explained that credit is not a flow. Credit is a contract between a lender and a borrower. If the borrower is "poor, uncertain, or afraid", they will not enter into a contract.
Obama isn't doing it enough
I also wrote an essay after I heard that middle brow writer, Tom Friedman, say "the banks are the heart of our system. They pump blood to our industrial muscles." No they aren't. They are just mechanisms for credit. We can find other mechanisms.
In James Galbraith's "The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too", Galbraith argues that the heart of our system lies elsewhere. It is the social contracts that government made with its people in social institutions created by the New Deal and The Great Society and even some institutions created by Richard Nixon. But these agreements were attacked by the Free Market fundamentalists starting in 1981. And what happened is that the social contract is coming undone to the point where our system is now on life support (to continue his heart metaphor).
March 8, 2009 4:58 PM | Reply | Permalink
Feral Cat:
I do not know how to email you directly as, in the immediate aftermath of last month's cliffhanger, I lost the link you sent me. But here is the update: when the test results came in, I got a reprieve.
Unfortunately, Everest did not; and so he still is slated for auction in May.
Maybe you can offer him sanctuary. Maybe not. It was probably wrong of me to ask that of you, loaded with comparative prospects.
Nonetheless, he is the best horse I have ever known. And he deserves a better fate than a series of sales that always end at the knacker.
March 8, 2009 6:09 PM | Reply | Permalink