There was a lot of bank rescue in economic stimulus and there was a lot of economic stimulus in rescuing banks.

Commercial banks have to be bailed out by governments then governments have to be bailed out by commercial banks.

But rescuing banks is not the same as rescuing the euro. Moreover, rescuing the euro is not the same as rescuing the European project.

As a result, the administration has confused bailing out the bankers and their shareholders with bailing out the banks.

The bailout of banks led to a wave of mergers.

We need a way to bail out good banks but allow bad banks to fail.

Debt equity swaps rescue the banks without rescuing their shareholders.

Yet when the Icelandic banks failed, the British and Dutch authorities had to bail out local depositors.

First, governments should not be pushed into insolvency just to save all banks.

But to save a financial system from collapse requires preventing all banks from failing at the same time.

Part of the difference, of course, reflects different starting conditions and the cost of bank rescues.

Yes, one can almost hear them saying, we understand that bailing out banks will subvert market discipline.

Indeed, perhaps a better explanation is that instead of creating more room for central bankers, the banking rescues narrowed their political room for maneuver.

So governments bailed out banks and economies, producing a sovereign debt crisis.

The choice to save the banks from the financial consequences of their own errors indicates a shift in values away from belief in the wisdom of the market.

Don t confuse saving bankers and shareholders with saving banks.

Any credible bailout plan must require creditor banks to accept that they will lose at least half of their money.

Even in France and Germany, large and internationally active banks potentially exceed the government s capacity to mount a rescue.

We gritted our teeth and for the sake of our national economies supported our governments as they bailed out the banks with public money.

Since last October, Western countries rescue packages for banks have reached about 4.3 trillion.

The justification was that bailing out the banks, however messily, would enable a resumption of lending.

One is to exclude bank rescues altogether only creditors would have to pay for bankers mistakes.

Indeed, the demand for bank participation is popular in Germany and justifiably so unlike the Irish rescue package.

The size of the calamity raises the question of whether small countries can really afford bank bailouts.

The mortgage crisis and the credit crunch have led to bailouts for the banks and the nationalization of housing finance and insurance.

At the time (2008 2009), large international banks had to be rescued by their home countries governments when they ran into trouble.

Fixing the too big to fail problem is certainly important, but the direct taxpayer costs of bank rescues were small change compared to the damage wreaked by the financial crisis.

Saving France, Saving Europe

To many, both in and outside of Greece, this stance was peculiar billions had been spent saving big banks, but evidently saving a country of eleven million people was taboo!

The goal would not be to rescue banks and their creditors, but to minimize the disruption that an uncontrolled default might cause.

The state, which is seeking to rescue the domestic automobile industry, allocated to the firm more credits through state owned banks.

But the cost of bank bailouts during Turkey s self inflicted crisis 12 years ago amounted to approximately 25 of GDP.

Saving Resources to Save Growth

Central banks and finance ministries are also complicit, since debt gets bailed out far more aggressively than equity does.

Perhaps their successful rescue of the banking system also misled some central bankers into believing that they possessed the Midas touch.

It might have gained more support just a few days later after senators witnessed the bailout of the giant eurozone banks.

Money from the international financial institutions was complemented by new money that creditor banks were supposed to put up as part of the price of being rescued by the IMF.

Bank rescue programs on the order of 5 trillion and Keynesian stimulus programs on the order of a further 1 trillion staved off collapse.

And bank bailouts, involving the direct use of public money to recapitalize failing institutions, are even more costly and politically unpopular.

Since George W. Bush showed the way towards bank nationalization, vast public spending, industrial bailouts, and budget deficits, the Socialists have been left without wiggle room.

growth in corporate welfare, from bank bailouts to ethanol subsidies to a continuation of agricultural subsidies, even when those subsidies have been ruled illegal by the World Trade Organization.

In the event of sovereign defaults, moreover, the cost of bailing out the banks may far exceed the cost of issuing Eurobonds or instituting a reasonable transfer regime.

Europe must break the vicious circle linking distressed sovereign borrowers with banks that are obliged, or at least encouraged, to buy their bonds, which in turn provide the funding for bank rescues.

In 1992, Sweden s central bank, the Riksbank, allowed private bank equity holders to be wiped out, but it rescued depositors and creditors by buying up risky assets of failing institutions.

If anything, they claim, his fiscal stimulus, the bank bailouts, and US Federal Reserve Chairman Ben Bernanke s aggressive monetary policy made matters worse.