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> What companies are "not allowed to fail"? I'm appalled anybody needs to ask this question after the 2008 bailouts.

deleted 4y ago
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rhaway84773 4y ago
You mean the bailouts which earned the government handsome profits? > In total, U.S. government economic bailouts related to the global financial crisis had federal outflows (expenditures, loans, and investments) of $633.6 billion and inflows (funds returned to the Treasury as interest, dividends, fees, or stock warrant repurchases) of $754.8 billion, for a net profit of $121 billion.[89] https://en.m.wikipedia.org/wiki/Troubled_Asset_Relief_Program https://en.m.wikipedia.org/wiki/Troubled_Asset_Relief_Progra... And the outflows include about 30% that went to Fannie and Freddie, which were quasi govt operations, and 10% to auto makers that the govt created no mechanism to recover money from. In reality, outside of the original Bear Sterns collapse, what the 2008 financial sector basically saw was a loss of confidence which was leading to a bank run. All the govt did was provided a backstop that prevented the bank run, which is why even though the government took ludicrously low ownership stakes for the money they put in, their stakes were still highly profitable. Another example showing this, but from the private sector, was Warren Buffett getting Goldman Sachs to basically pay him hundreds of millions of dollars just to lend his credibility, which was sufficient for them to weather the environment (this was structured as a loan, but the loan was just window dressing for the fact that Buffett was saying he had trust in GS). In reality, there was always gonna be a recession as house prices went back to more realistic levels and the wrongly rated AAA mortgage backed securities were marked to market to a much more realistic number, along with the knock on effects on various portfolios that included them. What tipped this recession into a major financial crisis was Paulson forcing Lehman brothers to collapse despite bids from at least 2 other companies that would have saved Lehman, simply because of a personal vendetta. The overnight and unexpected Lehman bankruptcy sowed massive uncertainty into the markets, drove a bank run, and triggered a chain reaction of failed assets that eventually made it to AIG, and the risk of an AIG failure, was what eventually caused the crisis. Much of it could have been avoided simply if Paulson wasn’t such an asshole.
- BeFlatXIII 4y ago
  > What tipped this recession into a major financial crisis was Paulson forcing Lehman brothers to collapse despite bids from at least 2 other companies that would have saved Lehman, simply because of a personal vendetta. I would find it absolutely hilarious if Apple banning certain kinds of in-app tracking combined with Binance sparking a run on FTX for laughs ended up collapsing the software and crypto industries for a few years.

deleted 4y ago

[deleted]

You mean the bailouts which earned the government handsome profits? > In total, U.S. government economic bailouts related to the global financial crisis had federal outflows (expenditures, loans, and investments) of $633.6 billion and inflows (funds returned to the Treasury as interest, dividends, fees, or stock warrant repurchases) of $754.8 billion, for a net profit of $121 billion.[89] https://en.m.wikipedia.org/wiki/Troubled_Asset_Relief_Program https://en.m.wikipedia.org/wiki/Troubled_Asset_Relief_Progra... And the outflows include about 30% that went to Fannie and Freddie, which were quasi govt operations, and 10% to auto makers that the govt created no mechanism to recover money from. In reality, outside of the original Bear Sterns collapse, what the 2008 financial sector basically saw was a loss of confidence which was leading to a bank run. All the govt did was provided a backstop that prevented the bank run, which is why even though the government took ludicrously low ownership stakes for the money they put in, their stakes were still highly profitable. Another example showing this, but from the private sector, was Warren Buffett getting Goldman Sachs to basically pay him hundreds of millions of dollars just to lend his credibility, which was sufficient for them to weather the environment (this was structured as a loan, but the loan was just window dressing for the fact that Buffett was saying he had trust in GS). In reality, there was always gonna be a recession as house prices went back to more realistic levels and the wrongly rated AAA mortgage backed securities were marked to market to a much more realistic number, along with the knock on effects on various portfolios that included them. What tipped this recession into a major financial crisis was Paulson forcing Lehman brothers to collapse despite bids from at least 2 other companies that would have saved Lehman, simply because of a personal vendetta. The overnight and unexpected Lehman bankruptcy sowed massive uncertainty into the markets, drove a bank run, and triggered a chain reaction of failed assets that eventually made it to AIG, and the risk of an AIG failure, was what eventually caused the crisis. Much of it could have been avoided simply if Paulson wasn’t such an asshole.

BeFlatXIII 4y ago
> What tipped this recession into a major financial crisis was Paulson forcing Lehman brothers to collapse despite bids from at least 2 other companies that would have saved Lehman, simply because of a personal vendetta. I would find it absolutely hilarious if Apple banning certain kinds of in-app tracking combined with Binance sparking a run on FTX for laughs ended up collapsing the software and crypto industries for a few years.