03/14/2009 05:12 am ET | Updated May 25, 2011

Stiglitz Reality Check: Banks Fail All The Time (VIDEO)

Propping up banks on the backs of taxpayers is both costly and unnecessary, according to Nobel Prize-winning economist Joseph Stiglitz. In reality, banks fail all the time, and there's no reason for the government to save them.

"Banks have failed over and over again in the history of America, in the history of capitalism, and it's unfortunately an all-too-frequent event," Stiglitz noted, arguing that bankruptcy is the economically prudent path for such firms. "It has to be managed well... we have in some examples under the previous administration, the way the Lehman Bros was handled was an example of it being done badly. But, for instance, to mention some recent examples, Washington Mutual went into bankruptcy, a number of banks went into bankruptcy... and obviously some people lost some money, but it didn't lead to a fundamental systemic problem."