Banks Should Never Fail

Banks should NEVER fail. Think about it. What do banks do? First they take other people's money and offer them an interest rate on their money. Then they turn around and loan the money out at higher rate. From this they always turn a profit. A second thing that they do is invest some of the money they hold. Good bank management takes some of the money and places it into safe and somewhat conservative investments. Naturally this would have some ups and downs, but never lead to the failure of the bank. This rational scenario is the way banks SHOULD operate...at high level of certainty of being healthy and profitable. At one time in history banks were almost always safe. Many years ago local banks, in particular, were about as safe and trustworthy as could be.

On home mortgages banks used a simple, basic formula based upon the buyer's income and the affordability in buying a home. This greatly minimized failures and foreclosures. Then along came the federal government. It was decided that banks should be forced into lending money to those who and couldn't afford a home, but should be given home mortgages anyway. It sounded nice to offer homes to the less fortunate but as it turned out it hurt everybody and the result was very predictable. It hurt those who purchased a home under these conditions by placing them in over their heads and placed tremendous financial stress on them leading to home foreclosure. (By the way there is nothing wrong with living in an apartment that you CAN afford, in fact many people had joyous memories of doing just that.) It hurt the bank since now the rational and profitable scenario given above was broken and the banks were in financial trouble, with many failing. It hurt America by a large number of failing banks that pushed the nation into an economic crisis. Finally, it hurt every single American since guess who ultimately pays for it all through "bail outs"?

The federal government was responsible for the housing crisis in America and for most of our nation's financial crisis. Don't ever think differently, the facts speak for themselves.