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The money wasn't just 'given' to banks, it was a loan that they ended up paying back. Just paying off loans for homeowners with bad mortgages would also have b

The money wasn't just 'given' to banks, it was a loan that they ended up paying back. Just paying off loans for homeowners with bad mortgages would also have been horrible - you're essentially rewarding bad quality loans. And how else would you bailout homeowners?

CPLX 5y ago
You could restructure the loans make the interest rate lower make the payment period longer prohibit the banks charging extortionate penalties and fees make the banks write down some of the principal or accumulated interest in arrears and lots of other stuff. It’s ridiculous to claim that there were no options here. And also it’s telling that you don’t even consider the idea that the homeowners could have gotten similar treatment, ie a favorable loan that enabled them to eventually pay the principal back. Also you’d have to explain how bailing out banks that made poor quality loans and are on the risk of insolvency isn’t “rewarding bad quality loans”.
- ImprobableTruth 5y ago
  A lot of loans were restructured (both due to the government and because banks themselves don't want people defaulting on loans either), but for a lot of the really bad loans the slight help from restructuring wouldn't have been enough. That's also why giving homeowners a loan wouldn't have helped, which is essentially just restructuring. >Also you’d have to explain how bailing out banks that made poor quality loans and are on the risk of insolvency isn’t “rewarding bad quality loans”. It is, to an extent, but a loan is much less of a reward than someone paying off your debt. That's also why new regulations were introduced so that future behavior likes this from banks wasn't incentivized.
neffy 5y ago
The resulting inflation would also have been somewhat epic.
mindslight 5y ago
An artificially low interest loan is a gift. Banks could have raised the same funds on the open market - they would have just had to pay for it. But rather than conservative cash holders being rewarded for better preparation, the Fed stepped in and made the overextended investment banks the winners instead. It's correct to say it was a gift.

CPLX 5y ago

You could restructure the loans make the interest rate lower make the payment period longer prohibit the banks charging extortionate penalties and fees make the banks write down some of the principal or accumulated interest in arrears and lots of other stuff. It’s ridiculous to claim that there were no options here. And also it’s telling that you don’t even consider the idea that the homeowners could have gotten similar treatment, ie a favorable loan that enabled them to eventually pay the principal back. Also you’d have to explain how bailing out banks that made poor quality loans and are on the risk of insolvency isn’t “rewarding bad quality loans”.

ImprobableTruth 5y ago
A lot of loans were restructured (both due to the government and because banks themselves don't want people defaulting on loans either), but for a lot of the really bad loans the slight help from restructuring wouldn't have been enough. That's also why giving homeowners a loan wouldn't have helped, which is essentially just restructuring. >Also you’d have to explain how bailing out banks that made poor quality loans and are on the risk of insolvency isn’t “rewarding bad quality loans”. It is, to an extent, but a loan is much less of a reward than someone paying off your debt. That's also why new regulations were introduced so that future behavior likes this from banks wasn't incentivized.

neffy 5y ago

The resulting inflation would also have been somewhat epic.

mindslight 5y ago

An artificially low interest loan is a gift. Banks could have raised the same funds on the open market - they would have just had to pay for it. But rather than conservative cash holders being rewarded for better preparation, the Fed stepped in and made the overextended investment banks the winners instead. It's correct to say it was a gift.