Bailing out Goldman Sachs
What to do when a major financial institution fails is a question that causes great debates amongst economists.
On the one hand bailing it out may stem the tide and prevent the situation turning into a major financial crisis; on the other hand letting the free market take its course scrubs inefficiencies from the system and punishes bankers who have acted recklessly.
As we saw during the 2008 banking crisis most governments tend to go for the first option and when they do the state has a wide range of powers to make sweeping reforms. In the UK this is still controlled at an EU level where directives offer a range of tools to member states. EU legislation also allows for cooperation and consistency in a sector that is increasingly international.
In this week's episode of the podcast we witness how this scheme operates in the context of a poor business decision by investment firm Goldman Sachs.
That company offered a large loan to a Portuguese bank that went under soon after. Now they want the new bank set up by the government to honour that agreement.
In this week's podcast episode we not only discuss this issue in the context of European Union banking law but also whether Goldman Sachs should be given a second chance to rectify their poor decision and how the state's extensive power in this area can have repercussions of their own.
Episode link: http://uklawweekly.com/2018-uksc-34/
Subscribe on iTunes: https://itunes.apple.com/gb/podcast/uk-law-weekly/id1137316725?mt=2