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> 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/worldbusine

by 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)
    - bradshaw1965 16y ago
      Right, the famous Subprime Mortgage Problems Contained... http://archive.newsmax.com/archives/ic/2007/3/28/110709.shtml http://archive.newsmax.com/archives/ic/2007/3/28/110709.shtm... March, 2007
arethuza 16y ago
The UK government ended up effectively nationalizing monsters like RBS - which as far as I can see has been one big "Get out of Jail Free" card for the relevant organizations and their directors.
- pedrocr 16y ago
  Seems like the "restructure" bit is missing
marcamillion 16y ago
`Sweden spent 4 percent of its gross domestic product, or 65 billion kronor, the equivalent of $11.7 billion at the time, or $18.3 billion in today’s dollars, to rescue ailing banks. ` Hrmm...so let's see...4% of $14.14T = $565B. TARP alone was 700B - i.e. approximately 5% and that seems to not have been enough - because the Fed spent an additional $1.4T. How much more money did you want the US to spend? Obviously if it was as simple as nationalizing every single bank, they would have done that. But the US banking industry is much more complicated than any other country - much less Sweden's (with all due respect). To whit, so far this year the FDIC has 'nationalized' more banks than they did 2009. https://www.fdic.gov/bank/individual/failed/banklist.html https://www.fdic.gov/bank/individual/failed/banklist.html So they are kinda doing what you suggest, but just to show you how difficult such a task really is, they are still winding them down almost 2 years later.
- pedrocr 16y ago
  >How much more money did you want the US to spend? Obviously if it was as simple as nationalizing every single bank, they would have done that. But the US banking industry is much more complicated than any other country - much less Sweden's (with all due respect). If the banks had not been bailed out by TARP they could have been nationalized cheaply, restructured and relaunched. The equity holders would have been wiped out, as they should have been since their banks were broke, and the employees at these banks would not have extracted even more obscene amounts of money. By now you'd have functional banks driving the economy again. The amount of money isn't the issue here, it's the fact that it was used to prop up a failed system instead of used to restructure it. >To whit, so far this year the FDIC has 'nationalized' more banks than they did 2009. All of these banks are the small insignificant ones. None of the big ones have been restructured and most are still technically insolvent.
  - marcamillion 16y ago
    TARP was a form of nationalization. It wasn't complete nationalization in EVERY case, but the government did buy bank common & preferred stocks. In AIG's case, they bought 80% of all outstanding stock - essentially nationalizing them. Everybody else, it was pittances - a few % here and there. So that goes to show the amount of money needed. If they spent so much money and only got a few % of each bank, how much more money would be needed to purchase the entire banks altogether. Not all of the banks the FDIC has nationalized are insignificant ones. It started with IndyMac which is no small bank. The notion that the banks are still technically insolvent - says who? I think the markets are the best indicator as to the health of the banks. As far as I can see, their bond spreads over Treasuries have fallen significantly in the last few months and their stocks have been rallying. So are you telling me that the markets (who are extremely sophisticated and thoroughly understand the banking industry) are being fooled by these banks? I hardly think so. BOA is up from it's low of $3, to $11.70. Citigroup (the most damaged of them all) is up to $4.17 from a low of $1.xx - the gov't owns the biggest stake in Citi than most other banks. Yes, their prices aren't as high as it used to be, but these things take time.

by pedrocr 16y ago

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)
  - bradshaw1965 16y ago
    Right, the famous Subprime Mortgage Problems Contained... http://archive.newsmax.com/archives/ic/2007/3/28/110709.shtml http://archive.newsmax.com/archives/ic/2007/3/28/110709.shtm... March, 2007

arethuza 16y ago

The UK government ended up effectively nationalizing monsters like RBS - which as far as I can see has been one big "Get out of Jail Free" card for the relevant organizations and their directors.

pedrocr 16y ago
Seems like the "restructure" bit is missing

marcamillion 16y ago

`Sweden spent 4 percent of its gross domestic product, or 65 billion kronor, the equivalent of $11.7 billion at the time, or $18.3 billion in today’s dollars, to rescue ailing banks. ` Hrmm...so let's see...4% of $14.14T = $565B. TARP alone was 700B - i.e. approximately 5% and that seems to not have been enough - because the Fed spent an additional $1.4T. How much more money did you want the US to spend? Obviously if it was as simple as nationalizing every single bank, they would have done that. But the US banking industry is much more complicated than any other country - much less Sweden's (with all due respect). To whit, so far this year the FDIC has 'nationalized' more banks than they did 2009. https://www.fdic.gov/bank/individual/failed/banklist.html https://www.fdic.gov/bank/individual/failed/banklist.html So they are kinda doing what you suggest, but just to show you how difficult such a task really is, they are still winding them down almost 2 years later.

pedrocr 16y ago
>How much more money did you want the US to spend? Obviously if it was as simple as nationalizing every single bank, they would have done that. But the US banking industry is much more complicated than any other country - much less Sweden's (with all due respect). If the banks had not been bailed out by TARP they could have been nationalized cheaply, restructured and relaunched. The equity holders would have been wiped out, as they should have been since their banks were broke, and the employees at these banks would not have extracted even more obscene amounts of money. By now you'd have functional banks driving the economy again. The amount of money isn't the issue here, it's the fact that it was used to prop up a failed system instead of used to restructure it. >To whit, so far this year the FDIC has 'nationalized' more banks than they did 2009. All of these banks are the small insignificant ones. None of the big ones have been restructured and most are still technically insolvent.
- marcamillion 16y ago
  TARP was a form of nationalization. It wasn't complete nationalization in EVERY case, but the government did buy bank common & preferred stocks. In AIG's case, they bought 80% of all outstanding stock - essentially nationalizing them. Everybody else, it was pittances - a few % here and there. So that goes to show the amount of money needed. If they spent so much money and only got a few % of each bank, how much more money would be needed to purchase the entire banks altogether. Not all of the banks the FDIC has nationalized are insignificant ones. It started with IndyMac which is no small bank. The notion that the banks are still technically insolvent - says who? I think the markets are the best indicator as to the health of the banks. As far as I can see, their bond spreads over Treasuries have fallen significantly in the last few months and their stocks have been rallying. So are you telling me that the markets (who are extremely sophisticated and thoroughly understand the banking industry) are being fooled by these banks? I hardly think so. BOA is up from it's low of $3, to $11.70. Citigroup (the most damaged of them all) is up to $4.17 from a low of $1.xx - the gov't owns the biggest stake in Citi than most other banks. Yes, their prices aren't as high as it used to be, but these things take time.