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The bailout was necessary but a tough pill to swallow. My understanding is that there was really no good way to provide direct relief to citizens. AIG and other
by epberry 9y ago
The bailout was necessary but a tough pill to swallow. My understanding is that there was really no good way to provide direct relief to citizens. AIG and others failing posed a systematic risk and the most effective way to stabilize the economy was to directely lend them hundreds of billions. I think most economists agree that letting the banks fail would have resulted in a depression. Sure the bankers would have lost everything but so would normal people. Instead your average American was spared the worst of it but at the cost of bankers not going to jail and a truly alarming amount of future debt.
- bradleyjg 9y agoThere was the Swedish solution (pushed during the crisis as I recall by Krugman among others): nationalize the failed institutions, with an eye to spinning them back off after the crisis had passed. That would have wiped out the shareholders, including employees with stock holdings, and caused losses on bonds, but would have kept the institutions running on a go forward basis in order to continue to provide financial services to the real economy.
- qaq 9y agoFinancial sector is 40% of US GDP one would imagine wiping out 20-30% of everyone's retirement accounts would not go over too well with voters.
- sumedh 9y ago> The bailout was necessary but a tough pill to swallow Capitalism for profits and socialism for losses.