A Prudent Alternative to Bank Nationalization
In his latest syndicated column, Independent Institute Senior Fellow Alvaro Vargas Llosa discusses an alternative approach to bailing out and nationalizing troubled banks. The title of his piece says it all: "Let Those Banks Fail!"
"Nationalization would compound the problems caused by the credit craze that led us to where we are, kick taxpayers in the stomach, and do in a convoluted way what the market would do swiftly," he writes.
Allowing insolvent banks to fail need not disrupt credit markets permanently or significantly, Vargas Llosa explains. Federal and state authorities could encourage the chartering of new banks. Along with many of the nation's surviving banks, they could take over the consumer loans, auto loans, and mortgage loans of the insolvent banks.
"Let Those Banks Fail!" by Alvaro Vargas Llosa (3/4/09) Spanish Translation
Lessons from the Poor: Triumph of the Entrepreneurial Spirit, edited by Alvaro Vargas Llosa