I think this onion has more than one layer. Let’s peel them back one at a time.
1. Who pays when banks go bust?
2. Who pockets gains when banks make money?
3. Who controls the decisions banks make about who gets to rent money, how much they can get, and how much they have to pay for renting it?
I would prefer the govt be minimally involved in #1, just enough to prevent the system from really blowing up (as distinct from whatever it takes to keep bubbles inflated).
Your point is that if the govt takes on the lion’s share of responsibility for #1, then at least it should get the lion’s share of benefits from #2. Sounds fair.
But the part that scares me a lot is #3. Having your Congressman decide who gets what loans isn’t a recipe for long-term fairness or success. And if we respond to overdoses of #1 with extra dollops of #2, to keep everything balanced, we may well end up with lots of #3 too. Your place on the political spectrum may be different from mine, but I hope you can see that would be a real disaster that could last for generations.
We’re better off, in my opinion, dialing down govt involvement in #1. Politically, so many are hooked on the drug govt guarantees and cheap money provide that it may be quixotic to attempt a rollback, but that would make us stronger economically over the long haul.
And yes, taking over bust banks quickly is a govt job. Go for it, but then back out ASAP. Saying that extra govt involvement is good because then govt can reap future profits as well as pay losses implies that the govt would continue running them when the govt isn’t needed any more because the banks are making real money again. V. dangerous.
