The Best Option

clipped from online.wsj.com More fundamentally, even if the logistics can be mastered, the President's plan would not have prevented the credit chaos of 2008. Bear Stearns was not a bank, could not borrow from the Fed's discount window and wasn't even all that big, yet the government still wouldn't let it fail. Under Mr. Obama's new rules, Goldman might simply decide to sell its bank—yet investors and its own traders would still assume it is too big to fail. That problem still needs to be addressed. Mr. Obama also keeps peddling the illusion that the entire crisis was caused by the bankers. But the root cause was a credit mania, courtesy of the Federal Reserve. The mania was concentrated in the housing market, courtesy of Congress and several Presidential Administrations. If we are going to have a Fed and a political class as reckless as we have, then we need a more comprehensive answer to financial risk. Bankruptcy for risk-takers who bet wrong is the best option.