Exactly why is a “FDR style” Bank Holiday needed and what would it achieve?
Differences between then and now:
1. FDIC – no need for bank runs since FDIC pays depositors for insured amounts when banks fail.
2. If FDIC runs short of funds, Treasury will replenish it, if needed with Congress’s approval. See TARP program of 2008 for precedent.
3. Fed has no restraint or constraint of gold backing or convertibility problem of 1930s (or debt of other nations). So liquidity expansion potential is limitless.
4. Bernanke may or may not know many things; but he has written books on Great Depression. So, one thing he won’t do is repeat 1930’s techniques.
