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No, its not. Have you forgotten the bailouts already?
by thunkshift1 6y ago
No, its not. Have you forgotten the bailouts already?
- xadhominemx 6y agoEquity holders of defunct financial institutions were not bailed out in 2009. They suffered massive losses.
- typon 6y agoThat's a slimy way of summarizing the situation
- xadhominemx 6y agoWhy?
- paxys 6y agoWhat about equity holders of hundreds of close-to-defunct financial institutions who were able to bounce back only due to government intervention?
- xadhominemx 6y agoOne of the roles of the fed is to prevent financial markets from suffering liquidity induced meltdowns. It’s a basic service that benefits everyone, like roads or the post office.
- paxys 6y agoSo to summarize – large, fully private financial institutions are so entrenched in the economy that them going under would be catastrophic for everyone. They also occasionally take massive risks with their money to make larger profits, and when those backfire the government has to bail them out with public money. And all this is totally not a gambling operation with a public safety net?
- xadhominemx 6y agoThe issues affecting liquidity were systemic - it did not just affect large institutions. And of course financial institutions are entrenched in the economy, that is the entire point of financial institutions. Capitalization requirements were too low and they are now much higher — but that meant bank shareholders on the whole did extremely poorly in the financial crisis. And unclear what you mean “bailout with public money” as direct investments in debt and equity instruments by the treasury in 09 were done on extremely favorable terms and were collectively quite profitable for government shareholders.
- jnwatson 6y agoDid you forget about AIG and Merrill Lynch? BoA was "strongly encouraged" to buy Merrill. And the Fed just loaned AIG a boatload of money. All the banks got loads of direct (via capital infusions) and indirect support (the "Fed put" on steroids). The owners of bank equity did fine while the working class got screwed. This is the environment the millenials started their investing opportunities in. That the game is rigged was made explicit early on in most millenials' investing career.
- xadhominemx 6y agoOwners of bank equity did not do fine in the global financial crisis
- anonAndOn 6y agoWhich banks went out of business? Weren't many (all?) major banks about to be insolvent before getting saved by their buddies (aka, future bank Directors) in government?
- xadhominemx 6y agoThey were illiquid not insolvent
- bidirectional 6y agoWhich hedge funds received bailouts? This insistence on viewing Wall St as a monolithic entity is just asinine. I can assure you the investment bankers at Goldman are not losing any sleep over GameStop.
- paxys 6y agoHedge funds didn't receive bailouts because they had all shorted the housing market. They instead made large profits while a large chunk of the country lost their jobs and homes. Meanwhile hundreds of banks and other financial institutions did get public funds. The state did not take any ownership, and some of them still haven't paid back billions. The profits generated since then – all directly due to the bailouts – have been private.
- xadhominemx 6y agoThe state did take ownership of entities that received direct bailouts - eg AIG, GM, Chrysler
- bidirectional 6y ago2008 was the worst year by far in the history of hedge funds, almost all lost money and hundreds of funds closed. They certainly did not all short the housing market, in fact there's several books and a Hollywood film about the few outsiders who did.
- briankelly 6y agoIt's pretty incestuous though. Mortgage backed security market got started at the Salomon Brothers before fumbling it to Morgan Stanley before GS ultimately decided when to pull the rug on it all. Citadel might not be a bank but market making is one of it's core functions much like them. Names might change but I bet many of the same players move between these firms.