3 ms·

Because there aren't any insolvent-but-otherwise-fine banks around?

• oh_sigh 7y ago
  So is the argument that the bailout was zero-sum, but the government came out ahead(and the banks lost), or was it value producing to bail the banks out?
  • wmil 7y ago
    I think the argument is that the government bailout was much simpler than having each bank go through a bankruptcy negotiations with their various creditors. Many of the debtees probably came out behind what they could have negotiated, but there was a net gain by avoiding all of that work to negotiate.
  • rayiner 7y ago
    The theory of bailouts is that they are value-destruction-avoiding, like bankruptcy restructuring. The banks lost a lot of money on the mortgage backed securities, but lost much less than they would have had those assets been sold at fire sale. The government came out slightly ahead; it got a part of what value wasn’t destroyed in a catastrophic unwinding of the banks.
• salawat 7y ago
  How can a bank be insolvent, but otherwise fine? That seems an oxymoron to me. Like saying of a company that it's fine because everyone came to work, but the company can't pay anyone. That is not fine.
  • rumanator 7y ago
    > How can a bank be insolvent, but otherwise fine? They may owe a lot to a specific creditor (or group of creditors) but otherwise have a sound, profitable business.