4 ms·

They often result in solid financial returns for the government holder of equity.

by hkmurakami 7y ago

phkahler 7y ago
The parent post was talking about the current practice of bailouts.
- jdsully 7y ago
  The government took equity stakes during the 2008 bailouts, it was widely regarded as a successful program among economists. The government got repaid and jobs were saved.
  - Retric 7y ago
    The government got shafted by vastly below market returns. Economists are looking at the big picture but tend to ignore people picking your pockets as insignificant. Loss aversion means people actually care about these things, it’s just the simplified economic models that are ignoring them.
    - jdsully 7y ago
      The government wasn't looking to maximize their return, if they were they wouldn't have included such huge protections for GM union workers. I don't think return maximization in a micro sense was the right approach anyways. The government got its pound of flesh through the increased tax revenue it generated by not having the economy implode.
      - Retric 7y ago
        > The government wasn’t looking to maximize their return Someone was, the simple word you looking for is corruption. The end goal of a corrupt state might be to build a road, but the specific cash flow ending up in well connected hands has absolutely nothing to do with the stated goal.
sfkdjf9j3j 7y ago
Is that actually true? TARP cost $426 billion in 2008 and when the assets were finally sold off in 2014, they summed $442 billion. So that's a 3.7% return during a time when the s&p 500 more than doubled in value. Do you have some examples where the government made these returns?
- reilly3000 7y ago
  Right but they maintained a whole tax producing economic center including (probably) corporate taxes and income tax on hundreds of thousands of wages from the companies themselves and their suppliers. Breaking even on a bailout is pretty phenomenal given the broader implications.
  - Retric 7y ago
    That assumes they had no leverage and no other options. Raising the rates by say 4% and companies would still have taken the money and the economy would have reacted in the same way.
  - hobs 7y ago
    You're missing the opportunity cost of doing twice as well?
- Anon1096 7y ago
  You're assuming that the s&p would have done well had the government not enacted TARP. It's pretty agreed upon by economists that the bailouts of the GFC saved us from financial collapse.
- deleted 7y ago
  [deleted]
- deminature 7y ago
  The TARP is still projected to net a $121bn profit for the taxpayer. Only a portion of loans have been returned to the government currently. https://projects.propublica.org/bailout/ https://projects.propublica.org/bailout/
gumby 7y ago
Citation needed. AFAIK they sometimes result in a profit (as with GM in 2008) which unsurprisingly gets attention. But the long history of postwar nationalization’s in Europe and the US are not promising by this metric. There are other reasons, some good, for doing so. Amtrak, for example, might better have been formed as a nationally operated part of the transit network rather than as a quasi-private-sector corporation that is neither fish nor fowl and suffers for it. Municipal utilities often work quite well at least here in Northern California, though at the national level I only know of the TVA and the western dam systems.
tehjoker 7y ago
Awesome, every poor person I know owns tons of those.

They often result in solid financial returns for the government holder of equity.

phkahler 7y ago

The parent post was talking about the current practice of bailouts.

jdsully 7y ago
The government took equity stakes during the 2008 bailouts, it was widely regarded as a successful program among economists. The government got repaid and jobs were saved.
- Retric 7y ago
  The government got shafted by vastly below market returns. Economists are looking at the big picture but tend to ignore people picking your pockets as insignificant. Loss aversion means people actually care about these things, it’s just the simplified economic models that are ignoring them.
  - jdsully 7y ago
    The government wasn't looking to maximize their return, if they were they wouldn't have included such huge protections for GM union workers. I don't think return maximization in a micro sense was the right approach anyways. The government got its pound of flesh through the increased tax revenue it generated by not having the economy implode.
    - Retric 7y ago
      > The government wasn’t looking to maximize their return Someone was, the simple word you looking for is corruption. The end goal of a corrupt state might be to build a road, but the specific cash flow ending up in well connected hands has absolutely nothing to do with the stated goal.

sfkdjf9j3j 7y ago

Is that actually true? TARP cost $426 billion in 2008 and when the assets were finally sold off in 2014, they summed $442 billion. So that's a 3.7% return during a time when the s&p 500 more than doubled in value. Do you have some examples where the government made these returns?

reilly3000 7y ago
Right but they maintained a whole tax producing economic center including (probably) corporate taxes and income tax on hundreds of thousands of wages from the companies themselves and their suppliers. Breaking even on a bailout is pretty phenomenal given the broader implications.
- Retric 7y ago
  That assumes they had no leverage and no other options. Raising the rates by say 4% and companies would still have taken the money and the economy would have reacted in the same way.
- hobs 7y ago
  You're missing the opportunity cost of doing twice as well?
Anon1096 7y ago
You're assuming that the s&p would have done well had the government not enacted TARP. It's pretty agreed upon by economists that the bailouts of the GFC saved us from financial collapse.
deleted 7y ago
[deleted]
deminature 7y ago
The TARP is still projected to net a $121bn profit for the taxpayer. Only a portion of loans have been returned to the government currently. https://projects.propublica.org/bailout/ https://projects.propublica.org/bailout/

gumby 7y ago

Citation needed. AFAIK they sometimes result in a profit (as with GM in 2008) which unsurprisingly gets attention. But the long history of postwar nationalization’s in Europe and the US are not promising by this metric. There are other reasons, some good, for doing so. Amtrak, for example, might better have been formed as a nationally operated part of the transit network rather than as a quasi-private-sector corporation that is neither fish nor fowl and suffers for it. Municipal utilities often work quite well at least here in Northern California, though at the national level I only know of the TVA and the western dam systems.

tehjoker 7y ago

Awesome, every poor person I know owns tons of those.