In the News: Down with the Autos, Up with the Banks!
A really compelling piece was put out just a day or so ago discussing the rationale behind “saving” the big banks (with the exception of a few early drops), while allowing the auto makers to panic, shrink, potentially collapse, and ideally, reemerge. While the idea is not terribly far fetched to many, this article does a great job of comparing and contrasting the similarities between our current situation and those of Japan’s and Korea’s pasts.
In short, giving up on the banks would cause an illiquid environment, and a lending freeze – in other words, allowing the banks to fend for themselves would cause lending practices to drastically tighten, which will result in many other industries and businesses, both unhealthy and healthy, that need fresh capital to survive, to, simply put, fail. Allowing the auto industries, however, to collapse (not entirely, but to an extent), will ideally force new entities to form, and a vast restructuring to occur, which will, ideally, allow the surviving and combined entities to be well equipped to take on the next stage of the game in far healthier and better balanced capacity. I am, of course, giving a mile-high overview of the article, but, hopefully, it was enough to whet your appetite for the full length piece. So, take a few minutes and give it a read.
