Two Republican Senators made comments today that are bound to be the subject of much discussion:
John McCain and Richard Shelby, two high-profile Republican senators, said on Sunday that the government should allow a number of the biggest American banks to fail.
“Close them down, get them out of business,” Mr. Shelby, the senior Republican on the Banking Committee, told ABC’s “This Week With George Stephanopoulos.” “If they’re dead, they ought to be buried.”
While the Alabama senator did not say which banks to shutter, he suggested that Citigroup might be on that list, saying the bank has “always been a problem child.”
Mr. McCain, appearing on “Fox News Sunday,” echoed that sentiment without identifying any banks. Mr. McCain, who lost the presidential election last November, also accused the Treasury Department of avoiding the “hard decision” to let “these banks fail.
Of course, letting the banks “fail” doesn’t mean they would disappear along with their assets and deposits, merely that they’d be taken over by other, more viable entities.
Would shaeholders and bondholders lose money ? Probably, but considering that you can buy a share of Citigroup for less than what it costs to use one of their ATM’s, it’s unclear to me how much more they can really be harmed.
Maybe if McCain had said that back during the campaign, things would have been different.
No question, the sooner we let them crash the sooner and easier the end of the recession will come. Likewise “the big 3″, likewise all of those bad mortgages, etc.