25 May 2008

A Point on the Bear Stearns Bailout

In the Washington Independent, Jonathan Macey asks a very important question, one that I missed completely: If Bear Stearns was too big to allow it to fail, why was it not broken up under antitrust laws?
In fact, there are plenty of tools at the regulators' disposal to deal with systemic risk and other catastrophes before a cataclysmic event occurs. In particular, the purpose of the antitrust laws is to promote and protect competition and make sure that no single firm grows so large that it threatens the entire economy.
I'm kind of embarrassed to have missed this.

I would also note that if regulators want to be proactive, the best solution for everyone right now is to break up the large investment banks so that they aren't too big to fail.

Go read.

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