Quote Originally Posted by VanChilds View Post
Kirk I know the short term would be horrible but if the Govt just allowed the Big Banks to fail (bankruptcy etc) wouldn't smaller banks pick up the slack? Am I wrong in thinking that there are plenty of smaller banks that are not full of toxic assets to would move quickly to fill the void? I wouldn't even call myself an economic novice but is seems that if there is a market someone would step up. I just really hate the idea of propping up failing industries and rewarding failure.
The big banks have already failed which is why they're not lending anymore. But small banks are all under pressure too and even if they weren't don't have the kind of capital to make the size of loans required to supply the market with adequate credit. Small banks are currently failing at the rate of two a week and the government takes them over, wipes the shareholders out, converts the debt into equity and sells the equity (bank shares) to new investors. That's what they should do with big banks like Citi and BOE but they're not doing it unfortunately. They'll have to eventually so hopefully they're just slow-walking the country towards nationalisation, but right now it really looks like they're going to keep bailing the black hole out.