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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 limit
by 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 agoHmm, 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.