Let them fail!

The financial meltdown is reminiscent of Hayek's 1930s theory of the cycle in which it was the malinvestments (bad investments) on part of the banks, induced by excessively cheap money (market rate of interest below the natural rate of interest) which eventually become unsustainable. At that stage, the interest rate gap reverses and the market rate exceeds the natural rate. Whatever rate the central banks may be willing to lend at, the commercial banks have put up their interest rates in a classic Hayekian fashion. Hence the slowdown. The cure is to allow more banks to fail than has been the case so far. This is perhaps a painful but effective way of getting rid of malinvestments or, as they are now called, toxic assets.

That isn't me, but it could well have been. Excellent analysis from Meghnad Desail, on Comment is Free.