Let the sick banks die so they can be replaced with healthy stubstitutes

Former student John Tamny scores a rhetorical bulls eye:

As [President Obama] sees it, "one of the most significant contributors to our economic downturn was an unraveling of our major financial institutions." No doubt that's the conventional wisdom of late, but it's hard to see how it could be completely true.

Indeed, finance as we know it is nothing if not a very broad concept. While Ford Motor Co. can trace its beginnings to car manufacturing, Quicken to tax software and E*TRADE Financial to low-cost stock trading, all are presently significant players in the business of lending. More broadly, retail behemoth Wal-Mart would have been in banking years ago if it weren't for regulations meant to keep it out, while leveraged-buyout giants of the Blackstone Group variety are dying to pick up insolvent financial institutions on the cheap.

In that sense, the true contributor to our economic downturn wasn't so much the failure of banks, but instead a bipartisan failure within Washington to let market forces prevail whereby finance substitutes would have entered a marketplace badly served by various dead banks walking. Put more simply, the unraveling of major financial institutions is not what presently ails us, but an unwillingness to allow them to die so that they could be replaced by healthy substitutes is.