Then this is article by Simon Johnson required reading.Because I know some of you don't like reading anything that can't fit into a Twitter post, I'll try to give you the Cliff's Notes version.
If you described the nature of the economic problems in the US to economic experts but hid the name of the country, the unanimous answer would be that we should nationalize the banking system.
Bailouts are not, and will never be, enough to solve the problems these banks are facing. Bailouts do not make the banks healthy, but give them enough cash to limp along a little further, delaying the inevitable.
Cleanup of the banking sector will be incredibly expensive, but it only becomes more expensive with each day that passes without the proper action being taken.
If a bank is considered too big to fail, then it must be nationalized and sold off in smaller pieces. Regulations must be put into place to prevent any financial institution from achieving "too big to fail" status again. In Johnson's words:
"Anything that is too big to fail is too big to exist."I will quote verbatim my favorite paragraph, in which Johnson discusses the merits of limiting compensation:
[O]utright pay caps are clumsy, especially in the long run. And
most money is now made in largely unregulated private hedge funds and
private-equity firms, so lowering pay would be complicated. Regulation
and taxation should be part of the solution. Over time, though, the
largest part may involve more transparency and competition, which would
bring financial-industry fees down. To those who say this would drive
financial activities to other countries, we can now safely say: fine.
