5 ms·

That is true in many aspects of the crisis, sadly. However, in this case, there is no public loss to speak of from the transaction itself. Rather, it served t

by prosa 16y ago

That is true in many aspects of the crisis, sadly. However, in this case, there is no public loss to speak of from the transaction itself. Rather, it served to further inflate the bubble that ultimately triggered the crisis.

pak 16y ago
Goldman did receive TARP funds, and used those funds to correct losses from maneuvers like this one. Regardless of whether or not Goldman Sachs considers that it paid back all of its TARP loans with interest, having the government prop up the company with a bottomless loan made of taxpayer money for any period of time is a public loss. It practically sponsors bad behavior on the part of Goldman and other large financial firms, because there is now a precedent for the government saving them from bearing the consequences of massively horrific choices as long as they would also cause horrific potential damage to the entire economy. The moral hazard incurred by these sort of transactions in light of the government's response is a significant and unresolved risk.
- billybob 16y ago
  Yes. This renews my fury about the bank bailouts. You know what's REALLY too big to fail? Capitalism. And rewarding market failure is the surest way to take it down.
- brezina 16y ago
  Exactly! We should file suit against the US Treasury for propping up Goldman and others with our tax money. They defrauded us by forcing us bankroll the bailout while providing limited upside for the massive risk we took.
- dmillar 16y ago
  You should read some of the actual accounts of how/why GS took the tarp funds. Paulson basically told them to take it, or the government would suck up all of their oxygen.
  - wdewind 16y ago
    Please share them, I'd love to.
  - ZachPruckowski 16y ago
    Goldman received aid from the taxpayer through the AIG bailout. AIG was responsible for the insurance and CDSes that covered any bad assets at Goldman. Had AIG gone under, Goldman would not have gotten paid for those CDSes that were on derivatives of bad mortgages, and would have had a few billion in losses in 2008-2009. Maybe not lethal damage, but it's on the back of the taxpayer that Goldman has been profitable these last 2 years.
  - ericd 16y ago
    Gotta second this. I know more than a couple people at Goldman, and they weren't happy about being made to take the funds, and were especially unhappy that they've been vilified for it, when they didn't want it. It's kind of annoying reading all the uninformed mob anger directed at them. The media has made them into a scapegoat out of them in particular, and for some reason, everyone is following along.
stretchwithme 16y ago
I think the real loss to the public occurred when AIG was bailed out and GS got paid over $10 billion they would not have gotten if AIG had been allowed to fail. And it should have been allowed to fail in my opinion. There would have been a lot of pain and other failures, but those are the risks of playing these games. If you protect people from all of the ultimate costs of doing things that are rewarding in the short term most of the time, but incredibly risky overall, they will keep doing them! And we will all pay a huge price for these parasites eventually if we don't wake up and stop subsidizing them.
- ericd 16y ago
  Letting a massive insurance company fail, and then letting dependant, blameless companies explode in a wave of secondary explosions throughout the economy as a result is not good national-level policy. There's a reason the govt. didn't let that happen, and it's not that they wanted to bail out their buddies. I'm for criminal charges for those that committed fraud, investigations, more regulation, and so forth, but this "We should have let them crash and burn, damn the consequences" idea was not likely the best course of action, though it seems to be a pretty common attitude for some reason.
  - stretchwithme 16y ago
    Its not about blame. Its about taking risks and suffering the consequences. When you pick a vendor, a bank or insurance company, there's a chance that entity will fail. You're the one who has to judge that. It's not the government's job to protect you from failing to do that, especially when others took the time to assess the vendor and decided to use a more stable, smarter company. And its certainly not the job of government to take the consequences from those that misjudged their bank or insurance company and assign those consequences to others that had nothing to do with the decision. I am not "damning the consequences". The consequences are unavoidable. Its just a question of who should pay for them. Do we leave the consequences with those making the decisions that led to them? Or do we dump them off on everybody else?
    - 16y ago

by prosa 16y ago

pak 16y ago

Goldman did receive TARP funds, and used those funds to correct losses from maneuvers like this one. Regardless of whether or not Goldman Sachs considers that it paid back all of its TARP loans with interest, having the government prop up the company with a bottomless loan made of taxpayer money for any period of time is a public loss. It practically sponsors bad behavior on the part of Goldman and other large financial firms, because there is now a precedent for the government saving them from bearing the consequences of massively horrific choices as long as they would also cause horrific potential damage to the entire economy. The moral hazard incurred by these sort of transactions in light of the government's response is a significant and unresolved risk.

billybob 16y ago
Yes. This renews my fury about the bank bailouts. You know what's REALLY too big to fail? Capitalism. And rewarding market failure is the surest way to take it down.
brezina 16y ago
Exactly! We should file suit against the US Treasury for propping up Goldman and others with our tax money. They defrauded us by forcing us bankroll the bailout while providing limited upside for the massive risk we took.
dmillar 16y ago
You should read some of the actual accounts of how/why GS took the tarp funds. Paulson basically told them to take it, or the government would suck up all of their oxygen.
- wdewind 16y ago
  Please share them, I'd love to.
- ZachPruckowski 16y ago
  Goldman received aid from the taxpayer through the AIG bailout. AIG was responsible for the insurance and CDSes that covered any bad assets at Goldman. Had AIG gone under, Goldman would not have gotten paid for those CDSes that were on derivatives of bad mortgages, and would have had a few billion in losses in 2008-2009. Maybe not lethal damage, but it's on the back of the taxpayer that Goldman has been profitable these last 2 years.
- ericd 16y ago
  Gotta second this. I know more than a couple people at Goldman, and they weren't happy about being made to take the funds, and were especially unhappy that they've been vilified for it, when they didn't want it. It's kind of annoying reading all the uninformed mob anger directed at them. The media has made them into a scapegoat out of them in particular, and for some reason, everyone is following along.

stretchwithme 16y ago

I think the real loss to the public occurred when AIG was bailed out and GS got paid over $10 billion they would not have gotten if AIG had been allowed to fail. And it should have been allowed to fail in my opinion. There would have been a lot of pain and other failures, but those are the risks of playing these games. If you protect people from all of the ultimate costs of doing things that are rewarding in the short term most of the time, but incredibly risky overall, they will keep doing them! And we will all pay a huge price for these parasites eventually if we don't wake up and stop subsidizing them.

ericd 16y ago
Letting a massive insurance company fail, and then letting dependant, blameless companies explode in a wave of secondary explosions throughout the economy as a result is not good national-level policy. There's a reason the govt. didn't let that happen, and it's not that they wanted to bail out their buddies. I'm for criminal charges for those that committed fraud, investigations, more regulation, and so forth, but this "We should have let them crash and burn, damn the consequences" idea was not likely the best course of action, though it seems to be a pretty common attitude for some reason.
- stretchwithme 16y ago
  Its not about blame. Its about taking risks and suffering the consequences. When you pick a vendor, a bank or insurance company, there's a chance that entity will fail. You're the one who has to judge that. It's not the government's job to protect you from failing to do that, especially when others took the time to assess the vendor and decided to use a more stable, smarter company. And its certainly not the job of government to take the consequences from those that misjudged their bank or insurance company and assign those consequences to others that had nothing to do with the decision. I am not "damning the consequences". The consequences are unavoidable. Its just a question of who should pay for them. Do we leave the consequences with those making the decisions that led to them? Or do we dump them off on everybody else?
  - 16y ago