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One 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
by xadhominemx 6y ago
One 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.