Re:Statement of SEC Regarding Recent Market Volatility
by Anon1096 on Friday January 29, 2021 @11:39AM
(#25959190)
There was no bailout here of the clearinghouses, and in fact your line of argumentation supports them. If you want institutions to be able to avoid getting liquidated for cents on the dollar or bailed out by the government, you need to also allow them to defend themselves in times of trouble. The clearinghouses are doing just that by forcing brokerages to get higher reserves.
Once one accepts that "socialized risk and private profits" isn't acceptable, then one must also accept that either we must allow even the too big to fail actors to fail, or we must not accept any actor to be too big to fail at all.
If public money is used to rescue a bank or clearinghouse, then the public should own it. A government institution can buy any failing bank/clearing house/ if it's so vital, and then the public owns it. Buying a commercial bank or clearing house at cents for the dollar and then selling it again in better times isn't necessarily a bad idea. It's certainly a better idea in terms of moral hazard than simply "bailing out" banks without ownership.