7 ms·

Because bailouts (usually) make the government money in the long run. They're in the form of low-interest loans, they aren't just handing out money to corporati

Because bailouts (usually) make the government money in the long run. They're in the form of low-interest loans, they aren't just handing out money to corporations.

eli_gottlieb 6y ago
Nonetheless, bailouts come with the social cost of increasing market concentration and moral hazard.
hobs 6y ago
Do you think subsidizing the poor enough so our economy doesn't have to choose between immediately collapsing and killing the poor wouldn't save us an enormous set of costs?
- bradstewart 6y ago
  I absolutely think we should do that. The problem is it's extremely hard to quantify that cost/gain, while its extremely easy to quantity the cost/gain of low-interest loans. Not to say its impossible, or that we shouldn't try--we should. But when you have a bunch of senators arguing, it's easier to point to the easy numbers.
  - dlp211 6y ago
    Why do we need to quantify it?
    - panzagl 6y ago
      Because we shouldn't spend tax money on solutions that show no gain or make things worse for the country as a whole.
      - pphysch 6y ago
        Last 75 years of foreign & drug wars: https://i.redd.it/b4rgt6ovw7k31.jpg https://i.redd.it/b4rgt6ovw7k31.jpg
      - quickthrowman 6y ago
        We spend tax money to make the nation worse all the time already, why does it matter now when it’s for helping out poor people?
  - adamsea 6y ago
    Is it really that difficult to quantify or is it that the government doesnt want to do the work of quantifying it? I think you said it yourself with your comment about senators arguing. The root cause is an overall lack of political will, not any technical or logistical impediments in modelling impact.
    - thrill 6y ago
      It's less political will than not having simple competence in any arena other than the political that got them there. Throwing gobs at cash at a broken system is what keeps Congress employed. If we had an unemployment system that didn't try to use "one size fits all" numbers, required two minutes on your phone to get enrolled, and two minutes on the employers' part to verify your application, then we wouldn't have have need of a significant number of government employees, and Congress's role wouldn't exist to posture about caring, but instead to simply fund a functioning system simply needed cash.
      - adamsea 6y ago
        > It's less political will than not having simple competence in any arena other than the political that got them there. The U.S. Census, GAO, and various other bureaucratic organizations (USDR, EPA, etc), all seem to be quite competent when it comes to performing studies and gathering data. So is the IRS, Department of Defense, etc. Of course there are lots of problems, but the U.S. Federal Government has plenty of agencies able to competently perform some sort of study.
- packetlost 6y ago
  It probably would. But solving that problem is significantly harder than putting out loans to large companies that employ thousands of people. If the airline industry collapsed, many other things would've followed. Certain industries are absolutely essential infrastructure to the economy and cataclysmic events can have massive ripple effects.
  - mitchdoogle 6y ago
    The loss of jobs and income is going to have cataclysmic cascading effects, worse than if a few large companies had gone under. It hasn't even started yet.
    - pphysch 6y ago
      Can you elaborate/link?
      - freehunter 6y ago
        What's there to link or elaborate? Look at the number of people applying for unemployment (I looked it up for you [1]). With a record number of people on unemployment and no real end in sight to the pandemic, something has to break. Basically, it doesn't matter how quickly we re-open if people don't have any money to spend, don't feel comfortable spending, and aren't leaving their homes. [1] https://tradingeconomics.com/united-states/unemployment-rate https://tradingeconomics.com/united-states/unemployment-rate
  - dfxm12 6y ago
    Whatever happened to doing worthwhile things because they're hard? Do you know how hard it is to have to quarantine yourself from your family because you've been deemed an essential worker, while getting seemingly nothing in return? Do you know how hard it is to live with the guilt of even possibly infecting others with COVID? Clearly, the current administration puts corporate profits over the lives of Americans. Clearly, the current administration is allergic to hard work. Hopefully, Americans can send the message in November that there's no room in our government for people like that.
throwaway_USD 6y ago
>They're in the form of low-interest loans, they aren't just handing out money to corporations. This is false as related to the PPP loans ($700B program, to put that in perspective during the 2008 financial crisis law makers passed an $800B stimulus to prevent total financial collapse). Its argued the banks paid that 2008 money back with interest (I won't touch that claim), but the PPP loans ($700B) are intended to be forgiven.
- mrep 6y ago
  That's for small businesses, not corporations.
- throwawaygh 6y ago
  >>> Our Quantitative easing and corporate bailouts >> Because bailouts (usually) make the government money in the long run. They're in the form of low-interest loans, they aren't just handing out money to corporations. > This is false as related to the PPP loans GP was comparing unemployment to QE and "corporate bailouts". Forgiveness of PPP loans is contingent on keeping staff on payroll and salary levels constant. So it's very much targeted at helping main street. In this sense, the intended use of PPP loans was closer to augmenting unemployment than a corporate bailout. To the extent that PPP loans have actually gone to small businesses, my impression is that that's mostly worked out -- it's basically unemployment without the lack of employment. To the extent that they haven't, the federal government should find a way to retroactively claw back abuse and/or exclude abusers from future rounds of assistance. BTW, worth noting that the PPP loans aren't really a handout if they're not paid back; their interest rate of 1%. Rates of return on fixed income are super low right now.
  - throwaway_USD 6y ago
    >Forgiveness of PPP loans is contingent on keeping staff on payroll and salary levels constant. So it's very much targeted at helping main street. Helps main street? Businesses just got free money from taxpayers. Sure for the forgiveness you have to spend 75% on payroll, in many instances what the amounts to is a business owner paying themselves 8 weeks of salary with taxpayer money and then that loan being forgiven. In the instance it actually goes to employees, again taxpayers basically just paid for 8 weeks of your payroll (these helps politicians by keeping unemployment numbers artificially low for 2 months, and keeping people off the temporary Covid unemployment benefits), the jury is still out if any of these employees will remain employed after 8 weeks (or we will see unemployment again be flooded with millions of applicants, only the extra $600/week won't be there). >my impression is that that's mostly worked out Its as much of a scam as the NINJA (no income no job applications) were leading to the financial crisis, people just formed businesses made up salaries and got a free 8 weeks of said salary (up to $100k salary). Or the fact that law makers and their families have specifically been exempt from any ethics review for conflict of interest, and in some cases law makers set up brand new companies just to obtain PPP loans.
cool_dude85 6y ago
Bailouts usually make the government money in the long run if you ignore the costs. Let's say the market rate for a loan like this is 4% and the government is loaning at .5%. Sure, the government has "made" .5% (less any defaults), but by any realistic understanding of what's going on, they lost 3.5%.
- gen3 6y ago
  The government goal isn’t to pursue good investments at a market rate. They are trying to prop up companies that investors don’t want to touch because of their current risk of failure. Spending some money now to keep a company in business can pay off in the long run, for example saving money on unemployment.
  - cool_dude85 6y ago
    I absolutely agree, the government can certainly have other goals other than making good investments. But don't muddy the waters by saying that they are making money on the program if they're giving below market loans. They might have good reasons to do it, but they're not making money on the deal.
    - Mirioron 6y ago
      They are making money though. The government doesn't make money for the government. It's not like a corporation. The government makes money for the country. Saving existing institutions from collapse during a disaster tends to be a very good investment for that.
      - drtillberg 6y ago
        When the Fed creates $xxx billion it "makes" money. The real question is whether the Fed bought something worthwhile. The fact that a market coalesced around the asset isn't that significant because the Fed can't withdraw from the market now without watching prices for the asset collapse.
    - 6y ago
JSavageOne 6y ago
That's a horrible bar to be deciding who gets a bailout. By that logic, perhaps he should eliminate the safety net because handing out money to poor people isn't "profitable".
gregwebs 6y ago
Some of the bailout loans might break even, but this is only some of what is going on. The paycheck protection loans get forgiven and are essentially just handing out money (with the caveat that it goes to labor costs). We also handed out $210 billion in tax cuts which is just a handout. On the whole the fed's balance sheet actually went up by 4 trillion dollars during the 2008 recovery [1] even though the loan program was less than 1 trillion. There is a trillion dollars of mortgage backed security purchases there that are a less visible bailout. The fed has already added 2 trillion this time with more to come. [1] https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm https://www.federalreserve.gov/monetarypolicy/bst_recenttren...
- koheripbal 6y ago
  In 2008, the US Gov't made hundreds of billions on the bailout loans they gave. Let me make that clear. Whenever people say "Wall St was bailed out by the taxpayers", they don't understand finance well enough to know that the taxpayers actually earned a significant PROFIT from that bailout. ...and naturally the media doesn't report on that important detail. "socialize the losses, privatize the gains" is a slogan based on complete ignorance.
  - gammarator 6y ago
    Since at least some of those companies were insolvent, the US taxpayer would have been better compensated if the companies had been nationalized instead. Wiping out the existing shareholders avoids moral hazard in the future as well.
  - rbrtl 6y ago
    MIT Distinguished Professor of Finance, Deborah J. Lucas, who is also the director of the Golub Center for Finance and Policy would disagree with you: http://gcfp.mit.edu/wp-content/uploads/2019/02/BailoutsV12.pdf http://gcfp.mit.edu/wp-content/uploads/2019/02/BailoutsV12.p... She's done research and cites evidence. You CAPITALISE basic terminology to patronise people out of wanting to challenge you.

Because bailouts (usually) make the government money in the long run. They're in the form of low-interest loans, they aren't just handing out money to corporations.

eli_gottlieb 6y ago

Nonetheless, bailouts come with the social cost of increasing market concentration and moral hazard.

hobs 6y ago

Do you think subsidizing the poor enough so our economy doesn't have to choose between immediately collapsing and killing the poor wouldn't save us an enormous set of costs?

bradstewart 6y ago
I absolutely think we should do that. The problem is it's extremely hard to quantify that cost/gain, while its extremely easy to quantity the cost/gain of low-interest loans. Not to say its impossible, or that we shouldn't try--we should. But when you have a bunch of senators arguing, it's easier to point to the easy numbers.
- dlp211 6y ago
  Why do we need to quantify it?
  - panzagl 6y ago
    Because we shouldn't spend tax money on solutions that show no gain or make things worse for the country as a whole.
    - pphysch 6y ago
      Last 75 years of foreign & drug wars: https://i.redd.it/b4rgt6ovw7k31.jpg https://i.redd.it/b4rgt6ovw7k31.jpg
    - quickthrowman 6y ago
      We spend tax money to make the nation worse all the time already, why does it matter now when it’s for helping out poor people?
- adamsea 6y ago
  Is it really that difficult to quantify or is it that the government doesnt want to do the work of quantifying it? I think you said it yourself with your comment about senators arguing. The root cause is an overall lack of political will, not any technical or logistical impediments in modelling impact.
  - thrill 6y ago
    It's less political will than not having simple competence in any arena other than the political that got them there. Throwing gobs at cash at a broken system is what keeps Congress employed. If we had an unemployment system that didn't try to use "one size fits all" numbers, required two minutes on your phone to get enrolled, and two minutes on the employers' part to verify your application, then we wouldn't have have need of a significant number of government employees, and Congress's role wouldn't exist to posture about caring, but instead to simply fund a functioning system simply needed cash.
    - adamsea 6y ago
      > It's less political will than not having simple competence in any arena other than the political that got them there. The U.S. Census, GAO, and various other bureaucratic organizations (USDR, EPA, etc), all seem to be quite competent when it comes to performing studies and gathering data. So is the IRS, Department of Defense, etc. Of course there are lots of problems, but the U.S. Federal Government has plenty of agencies able to competently perform some sort of study.
packetlost 6y ago
It probably would. But solving that problem is significantly harder than putting out loans to large companies that employ thousands of people. If the airline industry collapsed, many other things would've followed. Certain industries are absolutely essential infrastructure to the economy and cataclysmic events can have massive ripple effects.
- mitchdoogle 6y ago
  The loss of jobs and income is going to have cataclysmic cascading effects, worse than if a few large companies had gone under. It hasn't even started yet.
  - pphysch 6y ago
    Can you elaborate/link?
    - freehunter 6y ago
      What's there to link or elaborate? Look at the number of people applying for unemployment (I looked it up for you [1]). With a record number of people on unemployment and no real end in sight to the pandemic, something has to break. Basically, it doesn't matter how quickly we re-open if people don't have any money to spend, don't feel comfortable spending, and aren't leaving their homes. [1] https://tradingeconomics.com/united-states/unemployment-rate https://tradingeconomics.com/united-states/unemployment-rate
- dfxm12 6y ago
  Whatever happened to doing worthwhile things because they're hard? Do you know how hard it is to have to quarantine yourself from your family because you've been deemed an essential worker, while getting seemingly nothing in return? Do you know how hard it is to live with the guilt of even possibly infecting others with COVID? Clearly, the current administration puts corporate profits over the lives of Americans. Clearly, the current administration is allergic to hard work. Hopefully, Americans can send the message in November that there's no room in our government for people like that.

throwaway_USD 6y ago

>They're in the form of low-interest loans, they aren't just handing out money to corporations. This is false as related to the PPP loans ($700B program, to put that in perspective during the 2008 financial crisis law makers passed an $800B stimulus to prevent total financial collapse). Its argued the banks paid that 2008 money back with interest (I won't touch that claim), but the PPP loans ($700B) are intended to be forgiven.

mrep 6y ago
That's for small businesses, not corporations.
throwawaygh 6y ago
>>> Our Quantitative easing and corporate bailouts >> Because bailouts (usually) make the government money in the long run. They're in the form of low-interest loans, they aren't just handing out money to corporations. > This is false as related to the PPP loans GP was comparing unemployment to QE and "corporate bailouts". Forgiveness of PPP loans is contingent on keeping staff on payroll and salary levels constant. So it's very much targeted at helping main street. In this sense, the intended use of PPP loans was closer to augmenting unemployment than a corporate bailout. To the extent that PPP loans have actually gone to small businesses, my impression is that that's mostly worked out -- it's basically unemployment without the lack of employment. To the extent that they haven't, the federal government should find a way to retroactively claw back abuse and/or exclude abusers from future rounds of assistance. BTW, worth noting that the PPP loans aren't really a handout if they're not paid back; their interest rate of 1%. Rates of return on fixed income are super low right now.
- throwaway_USD 6y ago
  >Forgiveness of PPP loans is contingent on keeping staff on payroll and salary levels constant. So it's very much targeted at helping main street. Helps main street? Businesses just got free money from taxpayers. Sure for the forgiveness you have to spend 75% on payroll, in many instances what the amounts to is a business owner paying themselves 8 weeks of salary with taxpayer money and then that loan being forgiven. In the instance it actually goes to employees, again taxpayers basically just paid for 8 weeks of your payroll (these helps politicians by keeping unemployment numbers artificially low for 2 months, and keeping people off the temporary Covid unemployment benefits), the jury is still out if any of these employees will remain employed after 8 weeks (or we will see unemployment again be flooded with millions of applicants, only the extra $600/week won't be there). >my impression is that that's mostly worked out Its as much of a scam as the NINJA (no income no job applications) were leading to the financial crisis, people just formed businesses made up salaries and got a free 8 weeks of said salary (up to $100k salary). Or the fact that law makers and their families have specifically been exempt from any ethics review for conflict of interest, and in some cases law makers set up brand new companies just to obtain PPP loans.

cool_dude85 6y ago

Bailouts usually make the government money in the long run if you ignore the costs. Let's say the market rate for a loan like this is 4% and the government is loaning at .5%. Sure, the government has "made" .5% (less any defaults), but by any realistic understanding of what's going on, they lost 3.5%.

gen3 6y ago
The government goal isn’t to pursue good investments at a market rate. They are trying to prop up companies that investors don’t want to touch because of their current risk of failure. Spending some money now to keep a company in business can pay off in the long run, for example saving money on unemployment.
- cool_dude85 6y ago
  I absolutely agree, the government can certainly have other goals other than making good investments. But don't muddy the waters by saying that they are making money on the program if they're giving below market loans. They might have good reasons to do it, but they're not making money on the deal.
  - Mirioron 6y ago
    They are making money though. The government doesn't make money for the government. It's not like a corporation. The government makes money for the country. Saving existing institutions from collapse during a disaster tends to be a very good investment for that.
    - drtillberg 6y ago
      When the Fed creates $xxx billion it "makes" money. The real question is whether the Fed bought something worthwhile. The fact that a market coalesced around the asset isn't that significant because the Fed can't withdraw from the market now without watching prices for the asset collapse.
  - 6y ago

JSavageOne 6y ago

That's a horrible bar to be deciding who gets a bailout. By that logic, perhaps he should eliminate the safety net because handing out money to poor people isn't "profitable".

gregwebs 6y ago

Some of the bailout loans might break even, but this is only some of what is going on. The paycheck protection loans get forgiven and are essentially just handing out money (with the caveat that it goes to labor costs). We also handed out $210 billion in tax cuts which is just a handout. On the whole the fed's balance sheet actually went up by 4 trillion dollars during the 2008 recovery [1] even though the loan program was less than 1 trillion. There is a trillion dollars of mortgage backed security purchases there that are a less visible bailout. The fed has already added 2 trillion this time with more to come. [1] https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm https://www.federalreserve.gov/monetarypolicy/bst_recenttren...

koheripbal 6y ago
In 2008, the US Gov't made hundreds of billions on the bailout loans they gave. Let me make that clear. Whenever people say "Wall St was bailed out by the taxpayers", they don't understand finance well enough to know that the taxpayers actually earned a significant PROFIT from that bailout. ...and naturally the media doesn't report on that important detail. "socialize the losses, privatize the gains" is a slogan based on complete ignorance.
- gammarator 6y ago
  Since at least some of those companies were insolvent, the US taxpayer would have been better compensated if the companies had been nationalized instead. Wiping out the existing shareholders avoids moral hazard in the future as well.
- rbrtl 6y ago
  MIT Distinguished Professor of Finance, Deborah J. Lucas, who is also the director of the Golub Center for Finance and Policy would disagree with you: http://gcfp.mit.edu/wp-content/uploads/2019/02/BailoutsV12.pdf http://gcfp.mit.edu/wp-content/uploads/2019/02/BailoutsV12.p... She's done research and cites evidence. You CAPITALISE basic terminology to patronise people out of wanting to challenge you.