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> there's a difference between extending a line of credit and just giving banks money. Certainly. But loans have value when you want them. And most of these in

> there's a difference between extending a line of credit and just giving banks money. Certainly. But loans have value when you want them. And most of these institutions certainly got lower loan rates than their creditworthiness deserved. And loans weren't the only thing TARP did. Lots of shinanigans in the bailouts and TARP programs. For example the US treasury bought Goldman Sachs shares 35% above market rates. That's basically $3.5 billion in free money. The execs that fueled all that overrisky behavior often left with bonuses despite their failures and being complicit in an economic disaster. This was the rule not the exception. Its quite clear to me that these things were mechanisms for the elite in these companies to take advantage of the situation to their benefit, and they used the corrupt connections in politics to get it. Even if TARP actions didn't just give free money to the companies as a whole, the higher up people at these companies took away massive amounts of that money, at the expense of their shareholders and the taxpayers.

cletus 5y ago
Part of the problem there is we allowed investment banks to switch from being unlimited liability partnerships (ie like a traditional law firm) to being a limited liability corporation. By the way, I’m not defending backs here. The banks acted recklessly, even illegally, in the subprime era. Governments have taught them there is no downside to risky investments, which was part of the problem with several such incidents in the 1990s. But we do need to be clear that often these are loans that are repaid and that a collapse of the financial system like we had in the 1930s doesn’t help anyone.
- billytetrud 5y ago
  Hmm, I don't know too much about how investment banks being LLCs incentivizes bad behavior. I mean, sure, if bankers screw up and sink their bank, they can't be sued (unless they did something illegal), but the owners of those banks still don't want that to happen. What happened there? > a collapse of the financial system like we had in the 1930s doesn’t help anyone Sure, no one likes to live in a depression. But that's kind of besides the point, which is that the bailouts were massively corrupt. Its also pretty dubious that these institutions failing would have lead to anything like the 1930s. For one, bank runs played a large part in the great depression. But the FDIC didn't exist back then, and private clearing houses were put out of business by the Fed (who then for some reason refused to act as lender of last resort when it ended up being needed). The government buying corporate stock was uncontionable tho. It was pure corruption there, helping the elites escape with more money than they knew what to do with while the rest of us suffered.

cletus 5y ago

Part of the problem there is we allowed investment banks to switch from being unlimited liability partnerships (ie like a traditional law firm) to being a limited liability corporation. By the way, I’m not defending backs here. The banks acted recklessly, even illegally, in the subprime era. Governments have taught them there is no downside to risky investments, which was part of the problem with several such incidents in the 1990s. But we do need to be clear that often these are loans that are repaid and that a collapse of the financial system like we had in the 1930s doesn’t help anyone.

billytetrud 5y ago
Hmm, I don't know too much about how investment banks being LLCs incentivizes bad behavior. I mean, sure, if bankers screw up and sink their bank, they can't be sued (unless they did something illegal), but the owners of those banks still don't want that to happen. What happened there? > a collapse of the financial system like we had in the 1930s doesn’t help anyone Sure, no one likes to live in a depression. But that's kind of besides the point, which is that the bailouts were massively corrupt. Its also pretty dubious that these institutions failing would have lead to anything like the 1930s. For one, bank runs played a large part in the great depression. But the FDIC didn't exist back then, and private clearing houses were put out of business by the Fed (who then for some reason refused to act as lender of last resort when it ended up being needed). The government buying corporate stock was uncontionable tho. It was pure corruption there, helping the elites escape with more money than they knew what to do with while the rest of us suffered.