If Mark Thoma says it's crazy, it must be crazy... House Republicans voting to repeal "resolution authority", which is what would give the government authority to take over a (large) shadow bank. Without it, you either let the bank fail or you bail it out. Republicans calling out for preventing moral hazard, but you can't let a bank just fail. I bet if they a good deal of their savings in banks, they wouldn't want a bank to fail and eat up their money. I empathize with not giving banks an out if they stink up the joint, but allowing a bank to fail is not a good idea, nor do I think it's a credible threat. Bailing out, as pointed out in the article, allows the generous severance packages. I'm not suggesting that the government does a significantly better job than banks do, but governments don't have perverse incentives like bank managers do - the government doesn't necessarily care about profits.
Is repealing resolution authority just a way to insure that crappy bank managers still get mad money, rather than getting kicked out?
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