Financial Crisis Requires Deeper Changes
The IMF estimates the fiscal costs of rescue efforts to be high and difficult to obtain. ++ Still, the solid logic remains: the fiscal costs of deep recessions are greater than those of rescuing finance. ++ Choices of how to fix the system entail risks and little hope for amelioration. ++ Managed bankruptcy -- with unpleasant risks -- makes sense due to the dire effect on incentives of the alternative and the risk of creating "too-big-to-fail" institutions. ++ Fixing the financial system will just be the beginning of required structural changes.
