Are the Big Banks Faking a “Liquidity Crisis”?

I previously pointed out that when the Japanese government threw cash at their big banks in the 90’s, the banks just horded the money instead of using it to restore “liquidity”.

Well, a professor of economics and an expert in liquidity now hints that the entire liquidity “crisis” might be a hoax.

Bloomberg quotes the good professor:

“I suspect that part of what we’re seeing in the freezing up of lending markets is strategic behavior on the part of big financial players who stand to benefit from the bailout,” said David K. Levine, an economist at Washington University in St. Louis, who studies liquidity constraints and game theory.

Are the big banks faking a liquidity crisis because they know that if they act like the financial system is drying up, they’ll get a big bailout?

Like a kid who pretends he’s sick so he can play hookie from school, are the big players pretending they are financially “sick” so that they can play hookie from the free market?

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