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It's a mistake to treat banks like a monolith. The banks making the worst choices really did pay the price. Three of the five biggest investment banks in the US
by rhino369 11y ago
It's a mistake to treat banks like a monolith. The banks making the worst choices really did pay the price. Three of the five biggest investment banks in the USA either went bankrupt or were sold off for pennies on their previous value. Fannie and Freddie were essentially bankrupted.
These companies share holders were wiped out. That's exactly what happens with other businesses in bankruptcy. Well, other than Bear and Merrill stockholders getting a small percent instead of zero. That was a necessity because an investment bank really can't operate through a traditional Chaper 11 bankruptcy.
So if you own a bank, you can't be confident that you'll get bailed out when you fuck up on a grand scale.
But there is an issue of industry wide fuck ups and their effect on everyone else. Banks have a very unique feature in that when their competitors falter, they falter with them. In 2008, you have banks with no exposure to the toxic assets having huge issues with liquidity.
The bail outs may cause moral hazard for that sort of counter-party risk. For example, if you are Goldman Sachs maybe you don't ask too many questions about AIG insurance because you figure the government will make good on it either way.
This is a very complicated issue.
- nosuchthing 11y agoSeemed like a net win for the surviving banks with all the reduced competition, cheap real estate in default, and near 0% Fed rate. https://www.fdic.gov/bank/individual/failed/banklist.html https://www.fdic.gov/bank/individual/failed/banklist.html
- mikeyouse 11y agoThe banks loathe low rates.. They make most of their profits on interest margin which is greatly compressed in ZIRP environments.. Their margin is literally the lowest it's been since at least the early 1980's. [1] It's no surprise then that bankers are the ones clamoring loudest for interest rate hikes. Bill Gross, Lloyd Blankfein, Robert Shiller, insurance & pension execs are all begging Yellen to raise rates while the people in charge of companies that actually sell physical goods are telling her to hold off. [1] - https://research.stlouisfed.org/fred2/series/USNIM https://research.stlouisfed.org/fred2/series/USNIM
- TheOtherHobbes 11y agoAh. And that explains why the BoE keeps threatening to raise rates even though none of the usual excuses apply - inflation has been close to 0% for most of the year in the UK.
- nugget 11y agoWho went to jail for breaking the law?
- AnimalMuppet 11y agoWell, start by giving us a list of who broke the law, and what laws they broke, and we can look up names to find out... That is: Your post assumes that (unnamed) people broke the law. Let's not assume that. Let's either prove it, or not throw innuendo around.
- retrogradeorbit 11y agoIn order to find evidence an investigation needs to be conducted. So, if there is no investigation, there is no evidence, and thus no law breaking.
- AnimalMuppet 11y agoAll right, but in order for an investigation to be reasonable, there needs to be a basis for accusation, or something. We don't just say "AnimalMuppet must be guilty of something; let's start an investigation to find out what."
- retrogradeorbit 11y agoSo you are arguing there was no basis for investigation? Ok then. Whatever.
- rdtsc 11y agoThose who control the laws, don't usually break the laws. For example, when you write your own game, you can come up with any rules you want. You want goats to fly -- sure, you got flying goats. Some characters have more stamina than others? -- just tweak some config file. Well, it is not dissimilar for those in power -- they are making the rules. If they stop liking the laws, they'll just lobby to change them. Therefore asking "but how many of them are in jail" doesn't make much sense. Why would they put themselves in jail?
- mhuffman 11y agoIf you worked for the banking industry, on the other hand, things worked out pretty ok!