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Or they could have just not bailed them out. Just because the finance guys way they are the most important thing in the world doesn’t mean we have to believe them.

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I don’t disagree - I think Lehman Brothers was a great example that you can have a giant bank go under. The productive assets of Lehman were back at work within six months and the value destroying units disappeared. I think had the Fed/Treasury let Bear Stearns go bankrupt instead of making JPMC swallow them (same for BofA and Merrill Lynch) it might have ripped the band aid off, rather than dragging it out.

But importantly — bailing out the banks isn’t really bailing out the banks, it’s bailing out the banks’ creditors.

I totally agree with you, however when society at large is built on the back of such a belief, you can't just pull it out from under everyone overnight without major collateral damage.

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