Bankia and the Free Market
The Spanish government is bailing out Bankia at the tune of 19 billion euros. For some reason, this massive state intrusion in the economy is being touted by some as a failure of the free market.
There is nothing free-market about bailouts.
"Capitalism without bankruptcy is as Christianity without Hell."
Whoever lent Bankia money should lose (at least part of) it. It is in society's interest that such affairs be solved quickly, but there are other solutions other than bailing everybody out 100%. Here is one: just auction off Bankia next week. Whatever money is raised is distributed by the creditors (in order of priority) and the new owner assumes responsibility for making the bank a going concern.
There is no reason why this cannot be done in a few days.blog comments powered by Disqus