The Geithner plan and the general behavior of the administration seems to me a perfect example of the flaws in human thinking that behavioral economics cautions us against.

People are constitutionally averse to losses, and would prefer to wait and hope for Time to repair and replace what they’ve lost rather than acknowledge the market and call it quits. Investors like to be long volatility when they are down.

This seems to be the unstated philosophy with regard to distressed securities and failed financial managers.

Happy ever after in the market place…

Molly lets the children lend a hand…

Desmond stays at home and does his pretty face…

And in the evening she’s a singer with the band…

?