Remember all the hand-wringing last year about how unthinkable it would be to let GM go bust? It seems like distant noise now, but there was plenty.
And then we let GM go bust. And the world didn't end. And now, after an aggressive restructuring, even with car sales still weak, GM is talking about making a profit this year.
So stop worrying about how we can't let companies go bust. Bankruptcy works.
Now we just need to find a way to convince Tim Geithner, Larry Summers, and Ben Bernanke that it's okay to let financial firms go bust, too. Not collapse in a heap, the way Lehman did, but get taken over and restructured the way small banks do every week.
And/Or, alternatively--and even simpler--force banks to carry a significant amount of contingent convertible debt that converts to equity if the banks get into trouble. This will restore their capital ratios without the government having to step in and bail them out. And both equity-holders and bondholders will pay the price.
Anything but "Too Big To Fail."
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