The enthusiastic reaction to Lawrence Summers’s op-ed in the Financial Times about which I posted the other day is pouring in. I’ve already pointed to Felix Salmon’s comment:
The implication here — although Summers doesn’t quite spell it out — is that the debt of a country’s banks can and should be safer than the debt of the sovereign. That’s something which has never worked in the past, and it’s very hard to see how it could possibly work in the future.
Now here’s Arthur Fullerton:
Trying to create a world financial system where “no big financial institution in any country will be allowed to fail†is an unsustainable act of hubris and is itself doomed to failure. Doing so while simultaneously casting the poor adrift is shameful.
And Mike Shedlock:
This proposal of Larry Summers is pure idiocy at its finest. As stated above in a capitalistic system, money will be misappropriated unless failure is allowed. What would a bailout guarantee do other than promote more reckless behavior?
I’ll report on other reactions as I find them. I’m sure that German bankers were pleased with Dr. Summers’s proposals.
