5 ms·

Them going bust is actually a pillar of capitalism. This whole "too big to fail" bullshit coming from business-friendly politicians was just skewing the free ma

by _ak 10y ago

Them going bust is actually a pillar of capitalism. This whole "too big to fail" bullshit coming from business-friendly politicians was just skewing the free market.

tdb7893 10y ago
Weren't they actually too big to fail, though? I thought that multiple huge American banks failing would've made the recession a ton worse because banks would've failed and some large companies wouldn't have been able to make payroll and it all could've snowballed
- rwmj 10y ago
  The trick is to let them fail, then rapidly sift through the pieces and sell anything off which still has value. Even failing banks have plenty of good loans. Ordinary deposits with banks should be protected by the government because the general public cannot evaluate the risk of a bank collapsing. There's probably a case for some protection for companies that hold accounts -- although companies should really be aware that by depositing money in a bank, they become lenders to the bank, and they should have the skills to mitigate that risk. Perhaps smaller companies, and accounts specifically holding payroll, should receive greater deposit protection.
  - tdb7893 10y ago
    That makes sense. If the government were able to do all of that super fast it might be been fine. I just don't get all of the hate for the bailouts. I know it feel's like to many people the banks sort of "got away with it" but the bailout both stopped any bad effects from failed banks and the government made money off of it so it seems like a win-win for society in my perspective
    - caseysoftware 10y ago
      If it's a win-win, then it should be okay - even good! - for the banks+government to do it again. After all, everyone made money and the economy only almost collapsed, not actually. Regardless of the actual dollar amounts changed hands, what the US Federal government demonstrated was that risky - even illegal - behavior will be covered and some losses will be covered. It means that next time (and there will be one), we should assume the risks and losses will be even bigger.
      - tdb7893 10y ago
        But the current system was insufficient to stop the previous failure, too. Wouldn't bailing them out short term and then adding some regulation long term be a sufficient solution?
        TheSpiceIsLife 10y ago
        If the global financial system was built on a blockchain, couldn't we just fork and rollback the bad transactions? But more seriously, why did the resolution have to be a bailout. Could someone with the authority, and here I mean The Government, because they've got the guns, just tell the banks to rollback the wonky transactions?
    - jessaustin 10y ago
      When financial catastrophes are "bailed out", the main effect is not the money gained or lost by the involved parties. Rather, the main effect is the inevitable identical-but-larger financial catastrophes that will result when rational bankers compare speculative upsides to presumably bailoutable downsides.
  - PretzelFisch 10y ago
    Isn't this happened with many of the forced sales like WAMU, merrill lynch, countrywide?
  - TheSpiceIsLife 10y ago
    You say "ordinary deposits with banks should be protected by the government", and then go on to say something to the effect of 'oh yeah, and these other things which I think are good, but screw big companies, then can get fucked'. Which seems to translate, at least in my mind, to 'banks should be too big to fail, but only in the ways I like'. It's not clear, under your scheme, how we would draw the line between companies that "should be aware" of the risks and how they would mitigate them? Do we have to have insurance policies against our bank deposits? But who pays for that? Maybe I'm not reading with enough goodwill here though. Perhaps by "the government should protect" you mean to say something like 'there should be laws / regulations making it so that banks shonky investment dealings can't affect depositors accounts, at least for some class(es) of depositors' - in which case I agree.
    - rwmj 10y ago
      > Which seems to translate, at least in my mind, to 'banks should be too big to fail, but only in the ways I like'. I didn't say any of that. Banks should never be too big to fail. The only question is which of the bank's account holders should the government preferentially bail out by printing money equivalent to the holders' deposits.

by _ak 10y ago

Them going bust is actually a pillar of capitalism. This whole "too big to fail" bullshit coming from business-friendly politicians was just skewing the free market.

tdb7893 10y ago

Weren't they actually too big to fail, though? I thought that multiple huge American banks failing would've made the recession a ton worse because banks would've failed and some large companies wouldn't have been able to make payroll and it all could've snowballed

rwmj 10y ago
The trick is to let them fail, then rapidly sift through the pieces and sell anything off which still has value. Even failing banks have plenty of good loans. Ordinary deposits with banks should be protected by the government because the general public cannot evaluate the risk of a bank collapsing. There's probably a case for some protection for companies that hold accounts -- although companies should really be aware that by depositing money in a bank, they become lenders to the bank, and they should have the skills to mitigate that risk. Perhaps smaller companies, and accounts specifically holding payroll, should receive greater deposit protection.
- tdb7893 10y ago
  That makes sense. If the government were able to do all of that super fast it might be been fine. I just don't get all of the hate for the bailouts. I know it feel's like to many people the banks sort of "got away with it" but the bailout both stopped any bad effects from failed banks and the government made money off of it so it seems like a win-win for society in my perspective
  - caseysoftware 10y ago
    If it's a win-win, then it should be okay - even good! - for the banks+government to do it again. After all, everyone made money and the economy only almost collapsed, not actually. Regardless of the actual dollar amounts changed hands, what the US Federal government demonstrated was that risky - even illegal - behavior will be covered and some losses will be covered. It means that next time (and there will be one), we should assume the risks and losses will be even bigger.
    - tdb7893 10y ago
      But the current system was insufficient to stop the previous failure, too. Wouldn't bailing them out short term and then adding some regulation long term be a sufficient solution?
      - TheSpiceIsLife 10y ago
        If the global financial system was built on a blockchain, couldn't we just fork and rollback the bad transactions? But more seriously, why did the resolution have to be a bailout. Could someone with the authority, and here I mean The Government, because they've got the guns, just tell the banks to rollback the wonky transactions?
  - jessaustin 10y ago
    When financial catastrophes are "bailed out", the main effect is not the money gained or lost by the involved parties. Rather, the main effect is the inevitable identical-but-larger financial catastrophes that will result when rational bankers compare speculative upsides to presumably bailoutable downsides.
- PretzelFisch 10y ago
  Isn't this happened with many of the forced sales like WAMU, merrill lynch, countrywide?
- TheSpiceIsLife 10y ago
  You say "ordinary deposits with banks should be protected by the government", and then go on to say something to the effect of 'oh yeah, and these other things which I think are good, but screw big companies, then can get fucked'. Which seems to translate, at least in my mind, to 'banks should be too big to fail, but only in the ways I like'. It's not clear, under your scheme, how we would draw the line between companies that "should be aware" of the risks and how they would mitigate them? Do we have to have insurance policies against our bank deposits? But who pays for that? Maybe I'm not reading with enough goodwill here though. Perhaps by "the government should protect" you mean to say something like 'there should be laws / regulations making it so that banks shonky investment dealings can't affect depositors accounts, at least for some class(es) of depositors' - in which case I agree.
  - rwmj 10y ago
    > Which seems to translate, at least in my mind, to 'banks should be too big to fail, but only in the ways I like'. I didn't say any of that. Banks should never be too big to fail. The only question is which of the bank's account holders should the government preferentially bail out by printing money equivalent to the holders' deposits.