Monday, June 22, 2009

Bankruptcy and Capitalism

This is clearly a self-serving position for Branson to take, but his point is exactly right. Bankrupt firms should be allowed to fail. It is how capitalism works. Capitalism doesn't guarantee success. It rewards success and punishes failure.

In the U.S., capitalism is under attack. However, capitalism is failing because of Washington. For example, by supporting the large and technically-insolvent banks, our politicians are picking the winners, rather than leaving that job to the market. The failed large banks have been bailed out while smaller successful banks that avoided the financial disaster are further disadvantaged. These small "winners" should be taking market share from the failed banks and growing, but instead they find themselves subjected to higher FDIC insurance premiums, relatively higher funding costs, and ever more regulation. It's Washington that's broken.

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