> the Govt tries to avoid Lehman moment by preemptively starving liquidity to Evergrande
This reverses cause and effect. The government could afford to starve Evergrande of liquidity because it has control of the banks. The risk of systemic contagion was thus limited.
The American solution rhymes, but is different. The U.S. can't force banks to lend. But it does, post crisis, regulate systemic risk. The downside of this approach is in underscoping. If Coinbase or Tether cause a financial crisis tomorrow, China would be able to respond while the U.S. would need to devise something new. (The upside is it limits moral hazard and preserves the rule of law with respect to foreign investors.)
This reverses cause and effect. The government could afford to starve Evergrande of liquidity because it has control of the banks. The risk of systemic contagion was thus limited.
The American solution rhymes, but is different. The U.S. can't force banks to lend. But it does, post crisis, regulate systemic risk. The downside of this approach is in underscoping. If Coinbase or Tether cause a financial crisis tomorrow, China would be able to respond while the U.S. would need to devise something new. (The upside is it limits moral hazard and preserves the rule of law with respect to foreign investors.)