The other evening, I was interviewed by the charming David von
Drehle for an event at the Kansas City Public Library. He noted
that I had jeopardized my libertarian card by supporting the
bank bailouts, a position that I still hold. We discussed that a
bit, and when it came time for the Q&A, a fellow in the audience
asked why, if I thought massive banking crises sort of had to be
fixed by bailouts, I didn't also support deep reform that would
put a stop to the crises in the first place.  I responded that I
didn’t think such a reform was possible. And though I tried to
explain why, I think it might also be worth laying out here.
The fundamental fact of a banking crisis, which is different
from a crisis in any other industry, is that if people believe a
financial institution to be bankrupt, it actually is bankrupt.
As Arnold Kling puts it, banks exist to reconcile the desire of
households to lend short and borrow long -- we want to have bank
accounts we can empty at any time we want, but we want mortgage
loans