6 ms·

Perhaps the government did avert a short-term disaster. But it's unremarkable that they distributed billions to companies who effectively held taxpayers hostag

by holdenc 16y ago

Perhaps the government did avert a short-term disaster. But it's unremarkable that they distributed billions to companies who effectively held taxpayers hostage, threatening "if we go down, you go down with us." There was no way to not give out money without incurring intolerable short-term pain. I'll write a thank you letter to the government when the future of our nation isn't tied to the bad judgement of a few irresponsible companies.

RtodaAV 16y ago
They should have saved Lehman Brothers.
- cdavid 16y ago
  Why the downvote ? I believe it is pretty much agreed on that letting lehman brothers fall was a mistake - of course, saying it afterwards is easy.
  - borism 16y ago
    because this is not particularly popular opinion in extremely libertarian tech circles, no matter what people more knowledgeable about those things say.
  - thasmin 16y ago
    Where can I find details about this?
    - cdavid 16y ago
      I read mostly on French ecoblogs, but in English: - http://delong.typepad.com/sdj/2008/09/a-very-large-in.html - http://www.nytimes.com/2009/09/12/business/12nocera.html?_r=1&hp You can find much more if you look a bit. I think outside the libertarian on the fringe, most people agreed the decision was certainly not obvious to make at that time. I am sure it will take time before academics agree (if ever:) )on whether this was a mistake or not.
pedrocr 16y ago
> There was no way to not give out money without incurring intolerable short-term pain. Sure there was: http://www.nytimes.com/2008/09/23/business/worldbusiness/23krona.html http://www.nytimes.com/2008/09/23/business/worldbusiness/23k... The Swedes actually solved this by nationalizing all the failing banks, wiping out the equity holders, restructuring and privatizing again. It ended up not costing much. In the US a bunch of bankers got huge bailout funded bonuses and the banks are far from solvent even now.
- nl 16y ago
  But they had one incredibly useful attribute that the US government didn't have: time. They had time to extracted pounds of flesh from bank shareholders before writing checks, time to design policies to force banks to write down losses and issue warrants to the government 2008 was different. After Lehman collapsed, the government had to make it's initial intervention overnight, and the full package took weeks to put together, not months.
  - borism 16y ago
    There were 7 months between Bear Stearns (Feb '08) and Lehman (Sep '08) events, and things started to go downhill long before that - August 2007 in particular was the turning point. Many in the US were simply asleep at the wheel, both in government and private sector.
  - pedrocr 16y ago
    >2008 was different. After Lehman collapsed, the government had to make it's initial intervention overnight, and the full package took weeks to put together, not months. Looking this up in Wikipedia it seems the crisis started in early 2007 and Lehman collapsed in September 2008. So there was a year and a half to plan a response. http://en.wikipedia.org/wiki/Subprime_mortgage_crisis#Financial_market_impacts.2C_2007 http://en.wikipedia.org/wiki/Subprime_mortgage_crisis#Financ...
    - nl 16y ago
      Yes and no. Yes, there were plenty of signs of the sub-prime crisis. However, no one expected it to cause an investment bank like Lehman to collapse. It wasn't until the day of the crash that the people begun to dig into how the mortgages had been repackaged and sold, and it still wasn't widely know how badly the ratings agencies had failed in their analysis of this. (Ok, so it seems likely that Goldman had a fair idea and possibly went short Bear Sterns based on their exposure, but they weren't exactly spreading that information around)
JesseAldridge 16y ago
> I'll write a thank you letter to the government when the future of our nation isn't tied to the bad judgement of a few irresponsible companies. http://en.wikipedia.org/wiki/Obama_financial_regulatory_reform_plan_of_2009 http://en.wikipedia.org/wiki/Obama_financial_regulatory_refo...
marcamillion 16y ago
That's the vagaries of capitalism. Can't have your cake and eat it. Once you believe in Capitalism, there will always be systemically important companies - whether it is Google, Amazon, etc. or Banks - that should something go wrong with them will require a bailout of some nature.
- arethuza 16y ago
  I'm all for capitalism, but if there are companies which fall into the "too big to fail" camp I want them split up and/or their management put on special notice that if the companies do fail then the taxpayers will be coming after the assets of the the executives should the company fail. NB I really don't think that applies to Google or Amazon.
  - marcamillion 16y ago
    If Google went down...literally overnight, thousands if not hundreds of thousands of small businesses that rely on AdSense to pay their bills would be in serious hot water. Not to mention those companies that rely on Adwords to drive traffic through their doors (both online and offline). I can almost assure you that the markets would get very jittery and irrationality would likely spread to all sorts of other industries. It is easy to take these things for granted. Amazon is the same. There are thousands of mini-retailers that earn a living on Amazon. Amazon might even be more so - the equivalent of a Walmart going down....but almost worst. At it's extremes, the beauties of capitalism lead to large firms that build ecosystems to entrench their positions - whose failure would be significant and potentially systemically dangerous. It is the nature of capitalism - it actually is very healthy for the system. Over time they eventually fade out and other large companies come and take it's place - e.g. the newspaper industry, telecom, etc. So you can't really escape it.
    - arethuza 16y ago
      No doubt that would be really bad - don't get me wrong - but it's not quite at the scale of what almost happened in 2008.
    - 16y ago
guelo 16y ago
Most of the $700 billion TARP money was recovered, the costs are only going to be about $30 billion which is a bargain for what it achieved. http://finance.yahoo.com/banking-budgeting/article/110920/exclusive-treasurys-tarp-aig-bailout-costs-fall-to-30-billion?mod=bb-budgeting&sec=topStories&pos=main&asset=&ccode= http://finance.yahoo.com/banking-budgeting/article/110920/ex...
deleted 16y ago
[deleted]
asmithmd1 16y ago
What I don't understand is why they didn't break-up any banks that were "too big to fail" into pieces that were small enough to fail. Instead they did the exact opposite, arranging shotgun marriages for failing institutions so they are now part of a bank that is too big to fail. The Justice dept. has very successfully broken apart companies in the past: http://en.wikipedia.org/wiki/Bell_System_divestiture http://en.wikipedia.org/wiki/Bell_System_divestiture http://en.wikipedia.org/wiki/Standard_Oil#Breakup http://en.wikipedia.org/wiki/Standard_Oil#Breakup No government ownership is involved; one day you own 1 share of AT&T and the next day you own 1 share of the new AT&T and 1 share of each of the new baby bells. I would argue the AT&T break-up allowed the first internet boom to happen. Can you imagine how hard it would have been to get a T1 provisioned if there had been no competition AND AT&T was offering a service just like what you were trying to start
- Benjo 16y ago
  You mean during the crises? Would that have helped? How would you allocate the troubled assets to the baby banks? If you put them all in one place, that bank would fail and still cause the same chain reaction, except the debt would fail entirely on the customers of the bank instead of the bank itself. If you spread out the assets, then you'd just have lots of smaller banks fail instead of the larger bank. I suppose doing this could have spread the failures out over time.
  - asmithmd1 16y ago
    By all means put out the fire by doing what they did in the moment. But then respond not by passing ineffectual legislation that will surely be gamed and circumvented but with stress testing the banks to see which ones are too big too fail and breaking them up until they are small enough to fail. As to who gets the "toxic" assets, who cares? They are all but worthless. Auction them off to whoever will buy them that way we no longer have this fiction that they will ever be worth anything. The US tax payer is now explicitly on the hook for these assets. The sooner we know what they are truly worth the better.
    - 16y ago

by holdenc 16y ago

RtodaAV 16y ago

They should have saved Lehman Brothers.

cdavid 16y ago
Why the downvote ? I believe it is pretty much agreed on that letting lehman brothers fall was a mistake - of course, saying it afterwards is easy.
- borism 16y ago
  because this is not particularly popular opinion in extremely libertarian tech circles, no matter what people more knowledgeable about those things say.
- thasmin 16y ago
  Where can I find details about this?
  - cdavid 16y ago
    I read mostly on French ecoblogs, but in English: - http://delong.typepad.com/sdj/2008/09/a-very-large-in.html - http://www.nytimes.com/2009/09/12/business/12nocera.html?_r=1&hp You can find much more if you look a bit. I think outside the libertarian on the fringe, most people agreed the decision was certainly not obvious to make at that time. I am sure it will take time before academics agree (if ever:) )on whether this was a mistake or not.

pedrocr 16y ago

> There was no way to not give out money without incurring intolerable short-term pain. Sure there was: http://www.nytimes.com/2008/09/23/business/worldbusiness/23krona.html http://www.nytimes.com/2008/09/23/business/worldbusiness/23k... The Swedes actually solved this by nationalizing all the failing banks, wiping out the equity holders, restructuring and privatizing again. It ended up not costing much. In the US a bunch of bankers got huge bailout funded bonuses and the banks are far from solvent even now.

nl 16y ago
But they had one incredibly useful attribute that the US government didn't have: time. They had time to extracted pounds of flesh from bank shareholders before writing checks, time to design policies to force banks to write down losses and issue warrants to the government 2008 was different. After Lehman collapsed, the government had to make it's initial intervention overnight, and the full package took weeks to put together, not months.
- borism 16y ago
  There were 7 months between Bear Stearns (Feb '08) and Lehman (Sep '08) events, and things started to go downhill long before that - August 2007 in particular was the turning point. Many in the US were simply asleep at the wheel, both in government and private sector.
- pedrocr 16y ago
  >2008 was different. After Lehman collapsed, the government had to make it's initial intervention overnight, and the full package took weeks to put together, not months. Looking this up in Wikipedia it seems the crisis started in early 2007 and Lehman collapsed in September 2008. So there was a year and a half to plan a response. http://en.wikipedia.org/wiki/Subprime_mortgage_crisis#Financial_market_impacts.2C_2007 http://en.wikipedia.org/wiki/Subprime_mortgage_crisis#Financ...
  - nl 16y ago
    Yes and no. Yes, there were plenty of signs of the sub-prime crisis. However, no one expected it to cause an investment bank like Lehman to collapse. It wasn't until the day of the crash that the people begun to dig into how the mortgages had been repackaged and sold, and it still wasn't widely know how badly the ratings agencies had failed in their analysis of this. (Ok, so it seems likely that Goldman had a fair idea and possibly went short Bear Sterns based on their exposure, but they weren't exactly spreading that information around)

JesseAldridge 16y ago

> I'll write a thank you letter to the government when the future of our nation isn't tied to the bad judgement of a few irresponsible companies. http://en.wikipedia.org/wiki/Obama_financial_regulatory_reform_plan_of_2009 http://en.wikipedia.org/wiki/Obama_financial_regulatory_refo...

marcamillion 16y ago

That's the vagaries of capitalism. Can't have your cake and eat it. Once you believe in Capitalism, there will always be systemically important companies - whether it is Google, Amazon, etc. or Banks - that should something go wrong with them will require a bailout of some nature.

arethuza 16y ago
I'm all for capitalism, but if there are companies which fall into the "too big to fail" camp I want them split up and/or their management put on special notice that if the companies do fail then the taxpayers will be coming after the assets of the the executives should the company fail. NB I really don't think that applies to Google or Amazon.
- marcamillion 16y ago
  If Google went down...literally overnight, thousands if not hundreds of thousands of small businesses that rely on AdSense to pay their bills would be in serious hot water. Not to mention those companies that rely on Adwords to drive traffic through their doors (both online and offline). I can almost assure you that the markets would get very jittery and irrationality would likely spread to all sorts of other industries. It is easy to take these things for granted. Amazon is the same. There are thousands of mini-retailers that earn a living on Amazon. Amazon might even be more so - the equivalent of a Walmart going down....but almost worst. At it's extremes, the beauties of capitalism lead to large firms that build ecosystems to entrench their positions - whose failure would be significant and potentially systemically dangerous. It is the nature of capitalism - it actually is very healthy for the system. Over time they eventually fade out and other large companies come and take it's place - e.g. the newspaper industry, telecom, etc. So you can't really escape it.
  - arethuza 16y ago
    No doubt that would be really bad - don't get me wrong - but it's not quite at the scale of what almost happened in 2008.
  - 16y ago

guelo 16y ago

Most of the $700 billion TARP money was recovered, the costs are only going to be about $30 billion which is a bargain for what it achieved. http://finance.yahoo.com/banking-budgeting/article/110920/exclusive-treasurys-tarp-aig-bailout-costs-fall-to-30-billion?mod=bb-budgeting&sec=topStories&pos=main&asset=&ccode= http://finance.yahoo.com/banking-budgeting/article/110920/ex...

deleted 16y ago

[deleted]

asmithmd1 16y ago

What I don't understand is why they didn't break-up any banks that were "too big to fail" into pieces that were small enough to fail. Instead they did the exact opposite, arranging shotgun marriages for failing institutions so they are now part of a bank that is too big to fail. The Justice dept. has very successfully broken apart companies in the past: http://en.wikipedia.org/wiki/Bell_System_divestiture http://en.wikipedia.org/wiki/Bell_System_divestiture http://en.wikipedia.org/wiki/Standard_Oil#Breakup http://en.wikipedia.org/wiki/Standard_Oil#Breakup No government ownership is involved; one day you own 1 share of AT&T and the next day you own 1 share of the new AT&T and 1 share of each of the new baby bells. I would argue the AT&T break-up allowed the first internet boom to happen. Can you imagine how hard it would have been to get a T1 provisioned if there had been no competition AND AT&T was offering a service just like what you were trying to start

Benjo 16y ago
You mean during the crises? Would that have helped? How would you allocate the troubled assets to the baby banks? If you put them all in one place, that bank would fail and still cause the same chain reaction, except the debt would fail entirely on the customers of the bank instead of the bank itself. If you spread out the assets, then you'd just have lots of smaller banks fail instead of the larger bank. I suppose doing this could have spread the failures out over time.
- asmithmd1 16y ago
  By all means put out the fire by doing what they did in the moment. But then respond not by passing ineffectual legislation that will surely be gamed and circumvented but with stress testing the banks to see which ones are too big too fail and breaking them up until they are small enough to fail. As to who gets the "toxic" assets, who cares? They are all but worthless. Auction them off to whoever will buy them that way we no longer have this fiction that they will ever be worth anything. The US tax payer is now explicitly on the hook for these assets. The sooner we know what they are truly worth the better.
  - 16y ago