Tuesday, June 19, 2007

why weaker banks would not fail?

While the free market theory of letting weaker firms to fail is generally sound, the special character of banks makes them an exception for nearly all government. Their unique roles - e.g supplying credit, functioning as a transmission belt for government moneytary policy, and as a payments mechanism - frequently persuades governmetns to view the troubled bank more sympathetically than they do the ordinary non-financial company that is experiencing difficulties.

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