4 ms·

Lets make sure we're talking facts. The US Government made a profit off of the 2008 bailout[1]. I'm not an economist so I can't say much about the program but I

Lets make sure we're talking facts. The US Government made a profit off of the 2008 bailout[1]. I'm not an economist so I can't say much about the program but I'm lead to believe that had we not bailed out many banks the cost to tax payers would have been much, much higher. [1] https://www.washingtonpost.com/business/economy/tarp-moves-into-the-black-as-some-loans-are-repaid/2011/03/30/AFDrEc6B_story.html https://www.washingtonpost.com/business/economy/tarp-moves-i...

lawn 7y ago
Yes, their gamble of buying extremely risky assets paid off. Similar to how you can "bet all on red" and manage to win. But that doesn't make it a good long-term plan. The incentives for banks are still unchanged: "heads I win, tails I get bailed-out". And of course even if they run the economy into the ground they still get their bonuses.
- QuesnayJr 7y ago
  It worked out because the assets became risky from panic. The government is a large enough entity to stop the panic, and thus remove that risk.
  - lawn 7y ago
    The assets were always risky, way before the panic set in. I recommend the books After the Music Stopped or The Big Short for background on the crisis. (Also the movie The Big Short is excellent).
    - QuesnayJr 7y ago
      If the government's strategy was so risky, then why did it make money? The government wasn't gambling that there wouldn't be a crisis -- they intervened right in the middle of the crisis. (I should have said became riskier, though. Of course the assets had some risk.)
narrator 7y ago
They made money because the FED started buying the types of securities that they owned with electronically printed money. If this was China the whole thing wouldn't have even happened. The government would have just printed the money, recapitalized the banks and sold off their debts at a discount and punished (severely) anybody who violated banking regulation. The whole fiction that the government has to lend money into existence from the FED and the FED can buy assets off banks from money created out of nothing is this complicated convoluted game is intended to make it hard to figure out what's going on and to make it look like actual productive economic activity is occurring here.

lawn 7y ago

Yes, their gamble of buying extremely risky assets paid off. Similar to how you can "bet all on red" and manage to win. But that doesn't make it a good long-term plan. The incentives for banks are still unchanged: "heads I win, tails I get bailed-out". And of course even if they run the economy into the ground they still get their bonuses.

QuesnayJr 7y ago
It worked out because the assets became risky from panic. The government is a large enough entity to stop the panic, and thus remove that risk.
- lawn 7y ago
  The assets were always risky, way before the panic set in. I recommend the books After the Music Stopped or The Big Short for background on the crisis. (Also the movie The Big Short is excellent).
  - QuesnayJr 7y ago
    If the government's strategy was so risky, then why did it make money? The government wasn't gambling that there wouldn't be a crisis -- they intervened right in the middle of the crisis. (I should have said became riskier, though. Of course the assets had some risk.)

narrator 7y ago

They made money because the FED started buying the types of securities that they owned with electronically printed money. If this was China the whole thing wouldn't have even happened. The government would have just printed the money, recapitalized the banks and sold off their debts at a discount and punished (severely) anybody who violated banking regulation. The whole fiction that the government has to lend money into existence from the FED and the FED can buy assets off banks from money created out of nothing is this complicated convoluted game is intended to make it hard to figure out what's going on and to make it look like actual productive economic activity is occurring here.