One thing that is often overlooked in commentary (that I've read, anyway) is the leverage effect of time that the financial system has on ordinary business when it (the financial system) is distressed. The reasoning goes like this:

1 month into a crisis:

No big deal, some ordinary companies that were tottering already file for bankruptcy due to inability to get easy credit, but that's it.

3 months in:

More companies are forced into crisis mode by the lack of availability of commercial paper. They owe money they need to roll over, and can't. So, obligations they didn't expect to have to meet come due, and this either kills them or kills their earnings (and hence their reinvestment of now-nonexistent profits). The overall economy significantly slows.

6 months in:

Lots of companies are affected, even ones that don't finance, like mine. (Not telling, nah nah). This is because the people that buy whatever they're selling aren't buying any more. Even more companies go away due to the lack of credit.

Now, suppose the crisis is magically solved at month 1. I'd guess the economy pretty much goes back to normal right away. Some carrion feeders make their bucks off the early failures, that's it. Say 1-3 more months to recovery.

Month 3? Takes a while for things to recover, while laid-off people find new jobs and companies cautiously grow their way into the vacuums left by the fallen. Say 6 months-1 year.

Month 6: Wow, things are really getting hosed. This is what happened during the Depression, IMO. So much corporate infrastructure/ecosystem had been wrecked that the fire became self-sustaining. 2 years to recover? 4?

--So, I dispute the claim that "another month is no big deal". It could end up being a very big deal indeed, and we won't know until afterward. Is it really so much to ask that we err on the side of caution and over-react?

I can only hope this guy is perceived as Serious, because he's singing the only song I can imagine fixing these problems: putting a size cap on financial institutions. I just wish the same logic would be applied to *all* companies, and while we're at it, multinationals broken up into national entities (which then trade with one another like everyone else).

It would have been Madeira.

http://en.wikipedia.org/wiki/Madeira_wine#Early_American_history

/Food history nazi hat now removed.

fail, catastrophically collapse, contain toxic, chemicals, etc..

I'd be pretty happy to pay the extra 3c. But then, I end up paying $10 for a pack of six, so what do I know? ;]

The people who caused this crisis rightfully deserve scorn and consequences. That does not imply that the people who worked around them automatically do, even if they happen to be rich. Being rich is no kind of a crime. As long as you got your money legally, all's fair.

Don't like that? Change (and simplify!) the laws-- and live with the fact that some people will get paid for bending them as far as they can, without breaking them.

I also disagree with the guy giving his bonus away to charity. That smacks of an admission of guilt. If it were me, I'd brazenly fight for the bonus in the media and the courts. He (apparently) didn't cause any part of the problem, and shouldn't in any way be punished ex post facto.

Let's not act like Republicans, please?

Exactly. Why the threat of a filibuster is enough to dramatically alter the choices Democrats make is a total mystery to me. We should be forcing Republicans to show themselves as the real impediment to progress they are, not fleeing in terror at the notion of a real fight. *disgust*

Really interesting question. I'd like to break it into multiple questions/points though, if you don't mind:

A. Should (the US) government guarantee (aka insure) the debts of other countries?

B. Should private entities be allowed to guarantee the debts of private entities in other countries?

C. Should either of the above two cases be allowed automatically, or should they require legislative/regulatory approval on a case-by-case basis?

I think I lean toward:

A. yes

B. no (generally, and certainly not automatically

C. case-by-case (legislative/formal debate prior to authorization) is better than letting the bureaucrats decide.

I'd call it a fundamental design flaw. At some point, a consensus decision (or lack of one) allowed multinational corporations to come into existence. I think that was a mistake.. there is no fundamental need to allow imaginary entities that span countries to exist. I don't buy the argument that the fact that a real human being can have dual citizenship automatically implies corporations ought to be allowed to do business in multiple countries.

From a software design point of view, if someone asked me if I thought having one module access the data owned by another was a good idea, I'd laugh them out of the room. But in high finance, when literally world prosperity is at stake, we should err (in system design) on the side of caution, not efficiency.

I don't quite know whether to call em good or not ;], but poker did pay my bills for a few years.

I read the situation as a call, both on the odds (3:1 if you're up against a set and have a nut flush draw, a reasonable assumption-- the odds are a rough wash), and because you don't want to back down all the time. But then, I am willing to flip coins for fun to maintain my image as a loose cannon. Not all players will agree with that notion.

Your post "This is starting to smell like Writs of Attainder" reminds me of another Article 1 question that occurred to me: Was immunizing the telecoms not an example of an ex post facto law?

http://en.wikipedia.org/wiki/Ex_post_facto_law

*I'm not a lawyer and don't claim to be.

But seriously, did Congress violate article 1 when it granted amnesty to the telcos?