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Really Really Too Big To Fail


Would you like a loan? Lisa Poole/AP Photo hide caption

toggle caption Lisa Poole/AP Photo

In the wake of Fannie and Freddie, some experts are wondering about what would happen if a place like the Swiss bank UBS began to sink. UBS is so big it's like its own country.

Hans Eichel, former finance minister of Germany, said last week that Switzerland itself would be unable to bail it out if something went wrong.

Domenico Sinescalco, who was finance minister of Italy, put it more simply. "Permit me a joke," he said. "God save UBS.

"We don't need a crisis like that in Europe."

I'm curious if, in this global economy, we are breeding larger and larger institutions. No idea if that's true. Thoughts?



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I think the private capital model has an inherent flaw that is manifesting itself. In order to save money, it must be invested, but there isn't sufficient capacity to save as much money as a fully privatized economy needs to provide enough people enough security. Therefore lending standards must be lowered in order to expand the money supply.
Here is an essay I wrote that further develops the subject:

This is one from last year which covers some of the context of my thoughts on the subject:

Sent by John Merryman | 2:37 PM | 9-13-2008