"What the government's efforts did was backstop the liquidity of these banks, but the liquidity issues were a symptom of the bank issues, not the cause of the bank issues. The cause of the problem was, and still is, insolvency. I went through this in detail, exactly one year ago when Lehman and AIG went bust (Why didn't the Fed drop rates? Because it would have done little good). Here is a chart and excerpt from that post of over a year ago. If one were to chart the stocks of the companies that are in that chart, I am sure the solvency vs liquidity argument will be gelled, at least to some point..."

Comments: Be the first to add a comment

add a comment | go to forum thread