The Becker-Posner Blog: The Financial Crisis: Why Were Warnings Ignored?--Posner

A Solvency crisis requires Capital NOT buying of JUNK INVESTMENTS AT TAXPAYER EXPENSE!

The Becker-Posner Blog: The Financial Crisis: Why Were Warnings Ignored?--Posner: "The crisis appears to be one of solvency rather than (or perhaps along with) one of liquidity; banks, along with insurers of bonds and other securities, are undercapitalized and so, as I suggested last week, require a capital infusion rather than just a purchase of frozen assets.
All of which merely underscores the enormous cloud of uncertainty that has enveloped the crisis and left economists struggling to understand the causes, magnitude, future course, and cures of what is shaping up as the biggest economic bust since the Great Depression of 1929 to 1933. Last week's stock market crash may also reflect doubts about the government's competence to deal effectively with the crisis. There is a sense that its reluctance to take an equity stake in the banks reflects a doctrinaire hostility to public ownership."