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You'll recall the financial crisis in 2008, where many of us taxpayers paid massively to bail out these private investors using their own money.
by TravisLS 8y ago
You'll recall the financial crisis in 2008, where many of us taxpayers paid massively to bail out these private investors using their own money.
- guntars 8y agoThe taxpayers made $96B on those loans [1]. The issue then was that everyone was buying those CDOs because they were AAA rated, things like the pension funds and the banks themselves. I'm saying that if only individual investors are buying the corporate debt, it's not a systematic risk. [1] https://projects.propublica.org/bailout/ https://projects.propublica.org/bailout/
- TravisLS 8y agoThat's a fair point given the way I phrased my reply, but TARP is far from the extent of the cost of the financial crisis. The resulting market crash, credit crunch, unemployment all play a role in making this much more than a private issue. The fed estimated the cost to each American at $20-80K. [1] Also TARP could have very easily not made money, and bailouts are certainly not guaranteed to make money the next time around. [1] https://www.nytimes.com/2014/01/22/business/economy/the-cost-of-the-financial-crisis-is-still-being-tallied.html https://www.nytimes.com/2014/01/22/business/economy/the-cost...
- guntars 8y agoThat's fair too, though it's easy to blame all of the recession on the subprime bubble bursting while I think it would have happened anyway, eventually. And I'm advocating for letting banks, funds and investors fail if they lose at the game of musical chairs. For this to work though they need to be kept separate from rest of the finance system and use their own money.
- TravisLS 8y agoI'm agreed with you on that point. I wish we lived in that world and I think we should work harder to get there. As long as we don't, though, I'm resigned to recognizing the public costs of these private failures.
- munk-a 8y agoOh, is that why college is free for everyone? The public is put upon to absorb losses but is never issued the gains made.
- profalseidol 8y agoAnd they call it "Quantitative Easing" wtf. Time to look past Capitalism and our Modern Feudal Lords.
- masonic 8y ago"Altogether, accounting for both the TARP and the Fannie and Freddie bailout, $632B has gone out the door—invested, loaned, or paid out—while $390B has been returned." It goes on to claim revenues that make up the difference in the stated amounts. However, I don't see them say these figures are inflation-adjusted. 2018 dollars are roughly worth 83 cents in 2008 terms. More importantly, those Propublica stats cover only TARP and the Fannie Mae / Freddie Mac bailouts. It counts the fake "profits" on the GM bailout[0] but not the losses on the losing end of the GM reorganization split[1], serving to bail out union pension plans. [0] https://hubpages.com/politics/Obama-General-Motors-GM-Tarp-Bailout-Untold-Details https://hubpages.com/politics/Obama-General-Motors-GM-Tarp-B... [1] https://en.wikipedia.org/wiki/General_Motors_Chapter_11_reorganization#Motors_Liquidation_Company https://en.wikipedia.org/wiki/General_Motors_Chapter_11_reor...
- zjaffee 8y agoThat's still an incorrect way to view it given that the fed still is holding on to around a trillion dollars worth of those CDOs, and one could argue this is a huge factor in why the median American home price is so much higher than it was before the 2008 crisis.
- onlyrealcuzzo 8y agoIt's not, though. In real terms, house prices have barely risen.
- dv_dt 8y agoWhy do people always forget the 4.3T in Quantitative easing....
- kortilla 8y agoNot really. Investors got wiped out in many of the 2008 cases. Some banks were given loans but that money didn’t go to investors, it all had to be paid back.
- TravisLS 8y agoIndeed. I'm not saying the investors didn't have downside. Many did, and many of them lost everything (as they should have). But the public also bore a tremendous cost, and that makes the threat of another such crisis a public issue.
- munk-a 8y agoAdditionally, if the public at large is losing then someone out there is winning and that entity will see these crisies as profit opportunities instead of disasters.
- abakker 8y agoAs a high schooler, I remember buying citi stock for $2.60 or something like that. Just an anecdote, but my teenage self just said, “come on. It’s still a bank!”