As I write this, twitpics is down, overloaded with photos of protests at the G20 Summit in London and twitter itself is jammed. The Guardian reports that protesters and cops turned violent on each other (I won’t get into a “who started it” debate, cuz that’s childish) and some protesters stormed the Royal Bank of Scotland. Go for it.

While Londoners and the rest of Europe have their own reasons for anger against the banks, perhaps they share with U.S. citizens a sense of outrage over not only bank actions but the fundamental unfairness of government response. Here is what we are dealing with in the States, as described by Joseph Stiglitz:

The banks get to choose the loans and securities that they want to sell. They will want to sell the worst assets, and especially the assets that they think the market overestimates (and thus is willing to pay too much for).

But the market is likely to recognize this, which will drive down the price that it is willing to pay. Only the government’s picking up enough of the losses overcomes this “adverse selection” effect. With the government absorbing the losses, the market doesn’t care if the banks are “cheating” them by selling their lousiest assets, because the government bears the cost.

Dave Hill live-blogged the protests, if you want more.

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