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It's very unpopular to say this but I think it's important not to make assumptions about bankers' actions before the crisis. Many people and bankers expected ho

It's very unpopular to say this but I think it's important not to make assumptions about bankers' actions before the crisis. Many people and bankers expected house prices to continue appreciating and made decisions based on that assumption: https://www.russellsage.org/sites/all/files/Rethinking-Finance/Willen.rsage_paper_2_11pw.pdf https://www.russellsage.org/sites/all/files/Rethinking-Finan... Also, taxpayers made a profit on the bank bailouts. The bailouts that cost taxpayers a lot money were of GM and Chrysler: https://www.thebalance.com/auto-industry-bailout-gm-ford-chrysler-3305670 https://www.thebalance.com/auto-industry-bailout-gm-ford-chr... Wikipedia has details on TARP, the ProPublica page I usually cite for the return on bank bailouts is down: https://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program https://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program

grandalf 9y ago
Taxpayers making "profit" is the wrong metric. Why should those who mismanaged risk get bailed out? Better to fire sell it to someone more capable.
- Godel_unicode 9y ago
  And nevermind the fact that the economy would grind to a halt for decades while that allegedly more capable group figured things out? That sounds like a Great Leap Forward in economics.
  - pacifist 9y ago
    Or let them die and spend our efforts helping main street instead of Wall Street. Of course that would require a shift of priorities away from saving those who caused the mess.
    - grandalf 9y ago
      People forget that the skilled workers, intellectual property, plants, etc will continue to exist. What goes away is the jobs of some execs and some shareholder value, but new jobs and new shareholder value are created from the useful bits that remain. The priority seems to be keeping firms solvent in spite of horrible stupidity and decades of rent seeking behavior. This isn't capitalism it's a game that lets the powerful win over and over again. True capitalism has firm failure and creative destruction.
      - chiefalchemist 9y ago
        Yup. It's not capitalism. It's not the free market. It's a game that's gamed. Unfortunately no one wants to hear this.
      - iheartmemcache 9y ago
        Whoa there, a lot more went away than 'some shareholder value'. If you put your 40 years in pushing papers, maxed out your Roth IRA and 401k contributions in that wonderful glorious year of 2008 - that went away. Those people who previously had signed for an ARM with a lender[0] to purchase a home (for which likely had no income to justify a mortgage), when that rate shot up after that introductory term expired-- they certainly lost more than just "some exec jobs".[1] "the useful bits that remain." Yeah, a bunch of well-financed speculators will buy those foreclosed properties for pennies on the dollar and profit from the other end of that as well. And don't forget, for every dollar that was long on a swap, someone was short and made a damn killing. It's not like that those 30 year US notes were bought back by the government to decrease USD circulation.[2] I'm right there with you though on your second and third assertions. (Though, on an optimistic note, more companies seem to be side-stepping the standard monopolistic 'approach the standard set of IBs to underwrite your IPO and give them 6% since they're the only ones who have the Rolodex to call up John, his old buddy from Wharton, or Grant his golfing buddy') ==== [0] And let's not forget, banks around the world fixed LIBOR for years to fatten up their bonus. There are the equivalent of IRC chats admitted to evidence from a whistle-blower (immunity for amnesty) where Trader A would say "can you plz make sure that __ doesn't go above __ for 2 days? ive got <a position worth about 300 million USD> in <some ISDA product> deep, it'd rly help.. if you can make this work I'll get you whatever you need 50k..100k". (It's been a while since I read the transcripts, but that's the lexicon in which they spoke, and how the transactions were structured internally amongst what amounts to a group of ~100 people. With more or less complete control for the overnight rates for the entire world, they were gaming the system at magnitude so large where kickbacks between other agents would treat 50k and 100k EUR as interchangable.) [1] Basically every single person from the buyer, to the broker at the local bank who altered the risk profile so he could post more loans for his $500 closing bonus, to the broker who locked the loans and bundled them up into CDOs for vast amounts, to every quant with a PhD and a seat at ISDA who concocted tranching MBS', to every trader who made a risky trade -- until the house of cards fell -- was at fault. Some certainly harmed more than others. [2] https://fred.stlouisfed.org/series/WCURCIR https://fred.stlouisfed.org/series/WCURCIR I think that's M2, but par for the course
  - deleted 9y ago
    [deleted]
  - grandalf 9y ago
    So you are justifying corporate welfare because it helps the little guy. Insert laugh cry emoji here. The idea of the economy grinding to a halt is a straw man. Assets sold at a discount are typically snatched up. What is "lost" is just the profits that were earned via a bad risk management strategy. We should not incentivize firms to be sloppy about risk, ever. Vibrant firm failure and rebuilding is a better health indicator for an economy than state-backed crony corps claiming solid profits year after year.
- chiefalchemist 9y ago
  I agree. But not to parse words but the risk wasn't mismanaged. They knew that worst case they'd get bailed out. From their POV the risk was close to zero. Not only that, there was zero legal follow up. It's not difficult to figure out who is really running shit.
chiefalchemist 9y ago
Since 2008 I've read multiple articles - perhaps some even here - that attributed an increase in deaths to that crash. How does that factor in? They were highly compensated exectives who knowingly played Russian roulette with the world economy. Yet were never prosecuted? And in the end we "lost" a major bank so the power further concentrated. I can't see how any of that is a positive.

grandalf 9y ago

Taxpayers making "profit" is the wrong metric. Why should those who mismanaged risk get bailed out? Better to fire sell it to someone more capable.

Godel_unicode 9y ago
And nevermind the fact that the economy would grind to a halt for decades while that allegedly more capable group figured things out? That sounds like a Great Leap Forward in economics.
- pacifist 9y ago
  Or let them die and spend our efforts helping main street instead of Wall Street. Of course that would require a shift of priorities away from saving those who caused the mess.
  - grandalf 9y ago
    People forget that the skilled workers, intellectual property, plants, etc will continue to exist. What goes away is the jobs of some execs and some shareholder value, but new jobs and new shareholder value are created from the useful bits that remain. The priority seems to be keeping firms solvent in spite of horrible stupidity and decades of rent seeking behavior. This isn't capitalism it's a game that lets the powerful win over and over again. True capitalism has firm failure and creative destruction.
    - chiefalchemist 9y ago
      Yup. It's not capitalism. It's not the free market. It's a game that's gamed. Unfortunately no one wants to hear this.
    - iheartmemcache 9y ago
      Whoa there, a lot more went away than 'some shareholder value'. If you put your 40 years in pushing papers, maxed out your Roth IRA and 401k contributions in that wonderful glorious year of 2008 - that went away. Those people who previously had signed for an ARM with a lender[0] to purchase a home (for which likely had no income to justify a mortgage), when that rate shot up after that introductory term expired-- they certainly lost more than just "some exec jobs".[1] "the useful bits that remain." Yeah, a bunch of well-financed speculators will buy those foreclosed properties for pennies on the dollar and profit from the other end of that as well. And don't forget, for every dollar that was long on a swap, someone was short and made a damn killing. It's not like that those 30 year US notes were bought back by the government to decrease USD circulation.[2] I'm right there with you though on your second and third assertions. (Though, on an optimistic note, more companies seem to be side-stepping the standard monopolistic 'approach the standard set of IBs to underwrite your IPO and give them 6% since they're the only ones who have the Rolodex to call up John, his old buddy from Wharton, or Grant his golfing buddy') ==== [0] And let's not forget, banks around the world fixed LIBOR for years to fatten up their bonus. There are the equivalent of IRC chats admitted to evidence from a whistle-blower (immunity for amnesty) where Trader A would say "can you plz make sure that __ doesn't go above __ for 2 days? ive got <a position worth about 300 million USD> in <some ISDA product> deep, it'd rly help.. if you can make this work I'll get you whatever you need 50k..100k". (It's been a while since I read the transcripts, but that's the lexicon in which they spoke, and how the transactions were structured internally amongst what amounts to a group of ~100 people. With more or less complete control for the overnight rates for the entire world, they were gaming the system at magnitude so large where kickbacks between other agents would treat 50k and 100k EUR as interchangable.) [1] Basically every single person from the buyer, to the broker at the local bank who altered the risk profile so he could post more loans for his $500 closing bonus, to the broker who locked the loans and bundled them up into CDOs for vast amounts, to every quant with a PhD and a seat at ISDA who concocted tranching MBS', to every trader who made a risky trade -- until the house of cards fell -- was at fault. Some certainly harmed more than others. [2] https://fred.stlouisfed.org/series/WCURCIR https://fred.stlouisfed.org/series/WCURCIR I think that's M2, but par for the course
- deleted 9y ago
  [deleted]
- grandalf 9y ago
  So you are justifying corporate welfare because it helps the little guy. Insert laugh cry emoji here. The idea of the economy grinding to a halt is a straw man. Assets sold at a discount are typically snatched up. What is "lost" is just the profits that were earned via a bad risk management strategy. We should not incentivize firms to be sloppy about risk, ever. Vibrant firm failure and rebuilding is a better health indicator for an economy than state-backed crony corps claiming solid profits year after year.
chiefalchemist 9y ago
I agree. But not to parse words but the risk wasn't mismanaged. They knew that worst case they'd get bailed out. From their POV the risk was close to zero. Not only that, there was zero legal follow up. It's not difficult to figure out who is really running shit.

chiefalchemist 9y ago

Since 2008 I've read multiple articles - perhaps some even here - that attributed an increase in deaths to that crash. How does that factor in? They were highly compensated exectives who knowingly played Russian roulette with the world economy. Yet were never prosecuted? And in the end we "lost" a major bank so the power further concentrated. I can't see how any of that is a positive.