Blame the Government for the New Banking Crisis? Live With Lyn Alden, Arnold Kling and Zach Weissmueller
“We have learned over the last few days that many small and mid-sized banks in this country are Zombies,” writes Arnold Kling, a senior scholar at the Mercatus Center at George Mason University and former economist for the Federal Reserve system and Freddie Mac.
Following the run on Silicon Valley Bank, former U.S. Treasury Secretary Larry Summers urged the federal government to guarantee the money of all the bank’s depositors and warned that “now is not the time for lectures about moral hazard.” But Kling insists that “past crises,” such as the savings and loan collapse of the 1980s, “were bungled by authorities who were blind to the moral hazard problem.”
And Lyn Alden, founder of Lyn Alden Investment Strategies, says “banks are basically highly-leveraged bond funds with payment services attached, and we treat it as normal to keep our savings in them.” She argues that the Federal Reserve makes it nearly impossible for banks to hold the bulk of their customers’ deposits in
Article from Reason.com