Quote:
Originally Posted by loquitur
The system isn't cracking. It'll take a few months but things will consolidate and return to normal. Unless we start rescuing every bad business in sight like the Japanese government did - that kept japan in recession for 15 years.
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That is not what happened at all, loq.
Yamaichi Shoken, the Hokkaido Development Bank, the Japan Long Term Investment Bank, & Japan Securities & Trust went under. The JLTIB collapse set off the bankruptcy of Life, Sogo department stores, and Daiichi Hotel. These were all big firms. Needless to say, there were countless others that didn't make the papers. There were lots of buyouts as well, just as in the United States today. IBJ got swallowed up by Daiichi Kangyo, the Bank of Tokyo was bought out by Mitsubishi...
Here's the dilemma: if you let the firms go, you eventually find out just what people will pay for say, credit default swaps. It's not likely to be very much. Due to the magic of the market, everyone now has a ballpark figure for other credit default swaps. The assets of a number of other outfits will take a hit and the financial panic will spread. On top of that, people might ask "Hey, why was AIG even doing credit default swaps? Where were the SEC & CFTC?" What if Phil Gramm, McCain's economic "brain", had not been able to sneak that Commodity Futures Modernization Act through Congress in 2000?
My apologies for not getting my Japanese financial crisis post up. It disappeared into the aether three times before i gave up.