Have any of the big banks stopped making payments to creditors or depositors? Even without the TARP funds they would still be current on such payments, although dramatically undercapitalized.
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LMFAO! How the hell can you know that the big banks would still be current without all this government support? And it’s not just TARP, it’s TALF, AIG-FP, FDIC-guaranteed bank debt and all the other benefits that the government has forced taxpayers to provide. If the big banks can so easily make their payments, why did the FDIC need to step in and guarantee $1.4 trillion in bank debt?
Because supporting deposit and creditor payments in banking isn’t generally about solvency, it’s about liquidity. So long as depositors and creditors believe that they’ll get paid – that is, once a run on the bank is taken off the table – even a struggling bank – technically insolvent – can meet its obligations. For a long, long time. And often until it’s no longer insolvent. (Back to the analogy of the insolvent surgeon out of medical school.) But I realize that this is an inconvenient fact vis-a-vis your world view.
