I would agree that in this instance, we had a gordian knot like problem that made the S/L problem of the 90s seem like a cakewalk. In this instance the securitization of the debt instruments with almost geometric leveraging made it close to impossible to even find a starting point.
Thus an RTC like solution would have only been one part of a much much more complex solution.
The hard part is that we had/have everyday municipal and state investments in these instruments and the immediate loss of them would have resulted in the virtual halt of society. No that could not have been allowed to happen, I agree.
However I do believe a slower more orderly takeover and liquidation could have been achieved. That is, rather then the government pushing hundreds of billions to these entities, that money could have been earmarked to make the interest payments on the investments to keep all of the investors cash flow alive. I think that we have been conditioned that the survival of the investment banks is essential to the survival of the economy. I used to really belive that but I am not so sure anymore. I think that there WAS tremendous opportunity for midlevel banks who were actually prudent through the bubble and those guys all got CRUSHED by this bailout.
So yes this would have been an extremely tough one to solve or resolve HOWEVER I do think that it could have been possible.
Going back to the subject I am not comfortable with the govt being my loan originator, and the secondary market provider, and the entity I pay my taxes to. Again, I guess some people are quite comfortable with the expansion of govt. I am not. I dont think the private market is perfect at all and I think some regulatory measures when enacted correctly are beneficial. It is a hard line to walk.
