yeah, i do.
i am in a hurry as of now so i'll be very brief and try not to be too technical.
the reason behind the current crisis can be summarized in "bad regulation", IMHO. this doesn't mean that market economies need to be constrained further; it just means that the existing laws have not been enforced correctly, party because of greed and largely because of ignorance. in most countries, the law mandates that banks have to hold a buffer of capital which immunizes them against losses connected to loans they give out. this buffer is calculated by looking at the value of the loans and weighting them to take risk into account: i.e. if i lend 100 euros to the European Investment Bank, which is a supernational institution financed by European governments, with a default risk that approximates zero, i really just need to hold - say - 1 euro as precautionary capital (probability-weighted expected loss). on the other hand, if I lend 100 euros to my neighbor, who is a known gambler and drug addict, i need to stock 100 more euros against it, assuming that his probability of defaulting on me is 1. now, this is a very simplistic example, but it's the gist of what happened: loans were
not correctly weighted for risk, also thanks to the inherent complexities of the originate-to-distribute model, hence the disaster. supervisors couldn't keep up with financial technology and had no idea as to how the weights had to be corrected; pressure on the part of over-greedy banks made the rest.
as for whether failure or bailout is a better solution, i cannot give an answer as an economist as it's a political problem. it's really just a question of opinions. letting the US financial system fail, as it is, would almost certainly mean - besides impoverishment of specific individuals - a major shift in the balance of power between the US, China and Russia. look at the past week: Lehman fails, the Chinese cut their interest rates, the Orange Coalition in Ukraine collapses. Then the Chinese buy 20% of the new Morgan Stanley bank holding group, the Russians fire guns in the Caucasus, Congress works on the bailout. Now, whether one considers these shifts as inevitable or would rather keep the balance of power in favor of the US and, largely speaking, the West (although I'm not sure at all of this, maybe less of America means more of Europe, this is completely unclear to me) it's just a matter of politics, so everyone is going to have a different opinion independent of the technicalities.
