Henniger Gets It Right In Too Fat To Fail
Boiling bailouts Batman, somebody in the mainstream media has finally gotten it right. Daniel Henniger writes in his October 9 Wonderland column in the Wall Street Journal:
Consider the magnitude of these problems or the sheer, dumb size of the institutions. Another phrase of financial usage familiar everywhere now is “too big to fail.” But if something is too big to fail, isn’t it . . . too big?
He even goes on to use the term “dis-economies of scale”.
He acknowledges bungling big government like it’s old news, which it is. But he also suggests that maybe the banks have gotten too big. By the way they’re not getting any smaller or any less risky as a result of a shotgun marriages arranged by the treasury and FDIC.
I suppose it should be some consolation that Wells Fargo appears to be winning its battle with Citibank over who will gobble up Wachovia. In that story characteristics of the free market are few and far between however it does appear that the somewhat freer market found a much better solution to a liquidity crisis than the government did. If you are a Wachovia stockholder about seven times better. If your taxpayer infinitely better because the Citibank deal, brokered by the FDIC put taxpayer dollars at risk and the Wells Fargo deal doesn’t.