The banks the Senator Shelby is suggesting to fail are the mega banks that are well known around the world. Those banks are in fact, too big to fail. (Year to date the US has closed at least 17 banks, so plenty have failed.) At this point in time it's only going to make matters worse if the US was to allow a Bank of America or Citi-like bank to fail. Shelby ignores the issue from Japan in the '90s which many are already talking about resolving in the US. The Japanese spoon fed just enough money to the banks to keep them alive, but not much more. The term "zombie banks" referred to such banks and that's why many are calling for nationalizing the US banks, cleaning them up and privatizing them. Shelby's interpretation of the Japanese model is failed, but how often is he right? And McCain? My goodness. Can you imagine how bad things would have become with him in charge?
The United States should let some big troubled banks fail rather than commit more federal funds to prop them up, two key congressional Republicans said Sunday.
Senator Richard Shelby, top Republican on the banking committee, said the United States should not mimic Japan, which in the 1990s propped up failing banks and prolonged its economic downturn.
"Close them down, get them out of business. If they're dead, they ought to be buried," Shelby told ABC's "This Week" program. "We bury the small banks. We've got to bury some big ones and send a strong message to the market."
Financial authorities have been under increasing fire as hundreds of billions of dollars of loans and capital infusions into distressed institutions have failed to halt the economic downturn, which has only accelerated in recent weeks.
Senator John McCain, who remains a Republican leader after losing the 2008 White House race to President Barack Obama, criticized the new administration's response to the banks.
"I don't think they made the hard decision and that is to let these banks fail," McCain told "Fox News Sunday." As the U.S. government boosts its stakes in major banks such as Citigroup, talk of nationalization has stirred a debate over how far regulators will go to help the ailing financial system.
Shelby did not mention any banks by name but, when asked about Citigroup, he said: "Citi's always been a problem child."
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