And:

"Why would anyone inject equity capital into a financial institution if a few weeks later the government comes in and renders it worthless?'' said Axel Merk, president of Merk Investments, a Palo Alto, California-based fund manager. "The slope of bailouts is slippery and expensive.''

Why indeed. You can make more money speculating on their bonds if they are getting bailed out than you can lending to them and keeping them solvent.

This letter from a GOP voting Wall Streeter was published on US News. It is consistent with the current reliance on taxpayer to shore up failed, incompetent, corrupt and unsustainable business practices; basically he is with-holding his money from supporting the GOP unless they give Wall Street a blank check. It appears the neo-liberal conservatism in the US is really premised on the transfer of wealth from taxpayers to industry. That is not free market; that is not liberal; it is not republican.

I suspect the outcome of this will be that the shadow banking industry and investment banks will be regulated or an incoming SEC secretary will enforce the regulations that are on the books. Germany apparently warned the US to start enforcing some of the regulations, but the Bush Administration passed on it; we have not heard of large German banks going to the wall.

This won't be the death of neo-liberalism; too much wealth stems from free markets and their self-organisation. It is likely that he correct liberal response will be to put into place some limited regulations to avoid the type of volatility that continued banks can cause.