We are in a time of industrial revolution.  This statement has to be repeated and as a minimum debated.  That is why the US bailout of the auto sector failed.  Aside from the inability of US government to function effectively, if we dig below the surface, the underlying concern of the US politicians is the ability of the US auto makers to survive beyond the cash from the bailout.  In normal parlance this is called insolvent, and Chapter 11 is an appropriate approach.   It offers the time and thought to consider whether to retrench, re-engineer or just give up.

Chapter 11 is the right road for US carmakers | ft.com

Financial markets are supposed to allocate capital and monitor that it is used to good effect. They are supposed to be rewarded when they do that job well, but bear the consequences when they fail. The markets failed. Wall Street’s focus on quarterly returns encouraged the short-sighted behaviour that contributed to their own demise and that of America’s manufacturing, including the automotive industry. Today, they are asking to escape accountability. We should not allow it.

Relevance to Bankwatch:

We can apply the same logic to Banks.  It is assumed they will get their bailout, and come out the other side of the economic crisis just as before.

What if that is not the case?

What if banking as a business model is defunct?

Going back to the auto sector, and thinking about cars since the 50’s, why can we not drive a car in 2008 that gets 150 mpg?  The reason is because auto manufacturers are focused on features and cost effectiveness.  Where is the innovation?

The same argument applies to banking.  Banks are focussed on features and cost effectiveness.  Where is the 150 mpg bank account?  Where is the real innovation in banking?