December 2, 2010

Bernie Sanders, socialist, asks an important question.

It appears the Federal Reserve aid to the ailing banking sector went in no small amount to European financial institutions. While not alone in questioning the logic of the move of a country facing it's own solvency issues bailing out foreign institutions, Vermont Senator Bernie Sanders, asks one of the right questions (via FT);
“We’re talking about huge sums of money going to bail out large foreign banks,” said Bernie Sanders, the independent senator from Vermont. “Has the Federal Reserve of the United States become the central bank of the world?”
Sanders is a socialist.  Yet even he gets it.  It doesn't matter whether European banks have a presence in the U.S. or not - the bailout money was to keep financial institutions afloat. But not all institutions were meant to be protected.  That money comes from American taxpayers (or more correctly, future taxpayers). It is simply not meant to bail out Barclay's. Let Britain do that if it's needed. Or more appropriately, let the banks who have made bad lending decisions fail and it will teach the survivors a lesson - namely, be smarter about your lending decisions. And as a side note, another lesson is to keep the government out of lending decisions.

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