Can the Plan to Repeat RTC at Large Scale Save the US Banking Industry?
The US governmental plan to perform bail-outs of failed banks, which were “too big to fail”, failed itself. It encouraged investors to start duck shooting. As Raghuram Rajan, economist at University of Chicago and former chief economist at the International Monetary Fund stated on Bloomberg: “Bailouts are creating weird incentives, When you point out the guys you are going to back, you point out the next sitting duck.” That is the reason why finally the US Government intents to bail out the financial market instruments which fail, itself. During this crisis this has been attempted several times, without getting into effect. Last year the banking industry tried to save the itself by generating a super SIV, backing up all the illiquid assets. An attempt which gave hope to the stock markets but was never realized. Then the Fed basically tried earlier this year to rescue the industry with its “Trash for Treasury program”.They further opened access to the Fed’s term auction facility and Di
