From

"Secretaries Timothy Geithner and Hank Paulson told Congress at the AIG hearing earlier this month that they faced a choice: a bailout or another Great Depression. This is not true. Classic central banking offered a better alternative. Let AIG fail and lend to the market on good collateral. The Fed, acting as lender of last resort, should protect the market—not the failing firm. That policy worked well in the 19th and early 20th century by inducing banks and counterparties to hold collateral acceptable to the Fed following failures."

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