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If we're going to be capitalistic, apply Bagehot's dictum (from 1873) "in times of financial crisis central banks should lend freely to solvent depository institutions, yet only against sound collateral and at interest rates high enough to dissuade those borrowers that are not genuinely in need" [0]

I feel like, jail or no, the financial executives who got us into the mess - and who haven't really gotten us out yet - ought to be former financial executives that are working as, e.g., baristas.

Instead, a decision was made that the bloated mortgages that had been issued, would be turned from bad collateral into 'sound collateral', keeping asset prices high. It's like resolving Ford's problems with exploding gas tanks back in the 70's by arranging to buy all the bad cars.

[0] https://en.wikipedia.org/wiki/Walter_Bagehot




We shouldn't get any banking advice from anyone from the 1800's.


If you're seeking to broaden your perspective, you might find "Bagehot's Dictum in Practice: Formulating and Implementing Policies to Combat the Financial Crisis", written by a director at the Fed, to be worth your time.

[0] https://www.federalreserve.gov/newsevents/speech/madigan2009...


That's like saying we shouldn't pay attention to the lessons of the great depression because it was in the 1930s.


You shouldn't take advice on building a stable financial system from 1920s economists either.

Take lessons from their failures? Yes. Not what the GP was saying.


You should weigh any advice on its merits.




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