Infallible Private Institutions?!

So I was watching Bernanke on CNN today, and he mentioned something I don't understand. Maybe someone can explain it to me.

One of the congressmen questioned him about letting the zombie banks simply fail. Bernanke said that there were laws set in place which didn't allow the United States Federal Reserve authority to close private businesses. This makes sense, because the government shouldn't have the ability to forcibly bankrupt a company at will.

The part I don't understand is... wouldn't these humongous institutions have just failed on their own if the Fed didn't get involved? Now that they've involved themselves with these banks, are they virtually invincible as long as the Fed exists? If these propped up banks fall, that's considered a failure on the Fed's part, no?


[edit on 2.25.2009 by Avarus]

reply to post by Avarus


That man is a self absorbed idiot with power.

Yes they would have failed on their own without US Government aid.
Honestly it is none of the Federal Reserves business to be in with those banks. It was just he fastest way to stop a complete and total collapse of the financial system.

[edit on 25-2-2009 by Tentickles]

Not letting banks and large businesses die of natural causes was a major bad call last fall. It sets a bad precedent where corporations are given a fall back position, and less motivated to run themselves in the most prudent manner.

Even though arguments will presented as to who is allowed to go on life support and who isn't, it will be coming down to politics rather than common sense.


Mike F

yes yes and the obama mortgage plan crafted with the BANKERS /lenders in mind has a main aim of decreasing interest payments and extending the term.....i.e making sure the banks get paid by even the poor .........they are not writing down the principal .......they are not trying to keep people happy in their homes......they are trying to get banks paid some sort of income stream.....and they will lower payments to ensure this........this is not a bailout of the taxpayer...it is a bailout of the lender