Friday, September 26, 2008

The Faith Based Economy

The story in the WSJ about WAMU's takeover states that the bank had lost $16.7B in deposits in recent weeks. Most of that money was likely not at risk because of the FDIC, but depositors lost faith and took out their money anyway. This is why Congress needs to act now to pass a program that makes sense to Joe Public. Loss of faith in the financial system is what made the Great Depression great, a mistake we can't afford to repeat. That is why the FDIC and the SEC were invented in the 30's, to restore faith in the system and allow credit markets to work again.

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