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Ironically, the bank bailouts of 2008 were a wild success. The TARP program was paid back in under a year at a decent profit to the taxpayer. ("Through the Trea

Ironically, the bank bailouts of 2008 were a wild success. The TARP program was paid back in under a year at a decent profit to the taxpayer. ("Through the Treasury, the US Government actually booked $15.3 billion in profit, as it earned $441.7 billion on the $426.4 billion invested."). That's basically the cost of funding NASA for that year, paid for by the return on the bailout investment. I get that the optics of having the government loan money to banks is bad, but realistically, it was wildly successful.

Aaronontheweb 4y ago
That's if you ignore the secondary effects: "moral hazard," knowing that if you become big enough to create political waves in the event that you fail you can continue to gamble with depositor money, make your annual bonus, and safely be rescued by Federal depositor backstop / bailout in the event that you eventually go tits up. I wonder if that'll ever happen again after 2008...
- KptMarchewa 4y ago
  What they did with SVB prevents this thinking. Make the depositors whole, wipe out shareholders, prosecute the executives.
  - Aaronontheweb 4y ago
    Not really - rewriting the rules (FDIC insurance limits) midway through because SVB's own depositors yelled "bank run!" loud enough is still moral hazard. Do I need to make sure I bank with an institution that Jason Calcanis, Mark Cuban, et al use so I can insure my deposits with their political / popular leverage?
    - criley2 4y ago
      It's hardly a rewrite, everyone knows that your deposits with the big 5 are already 100% "too big too fail" anyway. The only change is that some smaller organizations might also get the same unspoken benefit that the big 5 already enjoy. This keeps them competitive, and as the US Gov and many folks noted, if they did not do this, everyone would flee to the Big 5 and regional/community banking would be wiped out.
- bumby 4y ago
  The irony is that "moral hazard" was the excuse used for not bailing out the homeowners directly who were defaulting on mortgages 15 years ago.
cycrutchfield 4y ago
Aside from the moral hazard, you are right. But most of the histrionics about bailouts, particularly the 2008 bailouts, are often based more on feelings than facts.
- bumby 4y ago
  >are often based more on feelings than facts. This is how it's being framed on many news networks as well. But I don't know if I quite buy it; maybe you can clarify. The 2008 was considered "different" because it was essentially driven by a bunch of bad bets on sub-prime mortgages. In contrast, this current one is being framed as just ensuring depositors. But that assurance is needed because the banks made bad bets on the bond market. Are the two really fundamentally different?
  - cycrutchfield 4y ago
    Well, when SVB got its “bailout”, what happened to its shareholders? They got wiped out. The people that made the bad bets didn’t get rescued.
roenxi 4y ago
Those are lies on the level of when the Russians do their tour talking about how they are defending themselves against Ukrainian aggression. If there was that much money to be made, it doesn't make any sense for the government to be involved sucking out all the profits. Bank creditors aren't idiots, they can be persuaded to wait a few years for a $15.3 billion bumper profit if the alternative is losing all their money. The issue is someone is pulling out smoke and mirrors in a complex situation to pretend that everything is going ok. Probably involving, to stick to theme, money printing.
- D_Alex 4y ago
  I don't think "the Russians" actually said that. Maybe you should use a different example, like when the US lied at the United Nations about WMDs in Iraq.
  - SenHeng 4y ago
    > Russian Foreign Minister Sergei Lavrov made headlines over the weekend when his claim the Ukraine war was “launched against” Russia provoked laughter from the audience during a forum in India. But I was in the room and can report he also received applause and indifference. https://theconversation.com/russias-foreign-minister-got-laughter-cheers-and-shrugs-in-india-outrage-over-the-war-isnt-universal-201163 https://theconversation.com/russias-foreign-minister-got-lau...
  - vel0city 4y ago
    Putin absolutely used language suggesting these actions were defensive against "fundamental threats" and in reaction to "the military machine is moving and, as I said, is approaching our very border". Putin puts the war against Ukraine as "a matter of life and death, a matter of our historical future as a nation" and a threat "to the very existence of our state and to its sovereignty." He even literally states "we are acting to defend ourselves." Putin himself has absolutely, 100%, without question, very publicly stated they needed to go to war against Ukraine to defend themselves against Western aggression. He absolutely framed it as a completely defensive action. Those words aren't some misquote or mistranslation or taken out of context, they're hosted on the Kremlin's website. I guess you don't consider Putin to be a Russian? http://en.kremlin.ru/events/president/news/67843 http://en.kremlin.ru/events/president/news/67843 https://www.atlanticcouncil.org/blogs/new-atlanticist/markup/putin-speech-ukraine-war/ https://www.atlanticcouncil.org/blogs/new-atlanticist/markup... Please quit spreading lies.
zug_zug 4y ago
fascinating, where can I read more about that?
slv77 4y ago
Nobody profits when a bad loan is made. Money that represents a promise of future spending made to someone who saved instead spent is destroyed. The only question is who is going to pay the cost. In 2008 the wizzes of the banking industry had made billions of bad loans. Who paid for it? Anybody who saved instead of spent and invested instead of speculated. In other words, almost all of us did. Once all the pluses and minuses are canceled out we’re all poorer for it. Saying anything else is putting lipstick on a pig.
- 700000thMistake 4y ago
  [dead]
naasking 4y ago
> Ironically, the bank bailouts of 2008 were a wild success. The TARP program was paid back in under a year at a decent profit to the taxpayer. I'm not sure that getting paid back by reinflating a bubble is the net positive you think.
fallingknife 4y ago
The only reason the banks were around to pay back TARP is because the US government declared them to be "too big to fail," essentially guaranteeing their debts. So the government put the taxpayer on the hook for all the liabilities of the banking system in exchange for a $15.3 billion profit. I would call that a lot of things, but a "wild success" isn't one of them.
ben30 4y ago
In uk it wasn’t though. Taken from Wikipedia regarding uk bail out. As at October 2021, the UK Office for Budget Responsibility reported the cost of these interventions as £33 billion
- pjc50 4y ago
  Ireland took an even bigger hit from Anglo-Irish, although in that case Sean Quinn did actually go to jail.
jjoonathan 4y ago
Was it paid back? Or was it "paid back" in the same way that a father might let his deadbeat son roll a loan so he can lie to his golf buddies about it? https://fred.stlouisfed.org/series/WALCL https://fred.stlouisfed.org/series/WALCL It sure seems to me that at least $1T stayed printed. Of course, that amount seems positively quaint now.
- comte7092 4y ago
  That graph isn’t a graph of TARP assets…
  - jjoonathan 4y ago
    That's my point. It's misleading to zoom in on TARP because TARP is only part of the story. Swapping one asset for another without reducing the net position is a dumb trick and it's embarrassing that so many people fall for it. Looking at the Fed's balance sheet is a simple way to track the big picture.
    - comte7092 4y ago
      Those were different program that frankly had nothing to do with each other policy wise. In one instance, the fed took over assets to backstop troubled banks, in the other, it sought to increase the monetary base. It’s not a “dumb trick” it’s basic monetary policy.
      - jjoonathan 4y ago
        It stops being a dumb trick the moment the Fed manages to wind down the balance sheet (i.e. never). Until then, the Fed is just the bagholder of last resort, and talk of a money printer is more accurate than talk about backstops and the monetary base.
        comte7092 4y ago
        They’ve literally been winding down the balance sheet for the last ten months.
blululu 4y ago
15B profit on 420B investment amounts 3.5% return YoY. I wouldn't brag about that sort of return. Yes TARP worked to forestall an even greater collapse. People were less upset that the government acted as an emergency creditor than by the fact that the people who made the mess of 2008 got bonuses paid out of that federal backup (a bonus is given for good performance - which was obviously not happening in 2008).
pjc50 4y ago
It is annoying that this is currently grey despite being entirely correct for the US. The banking rescue worked. A few crimes did get swept under the rug, like "robo-signing", but those weren't directly linked to TARP. Other countries did less well out of the event. The UK still owns the emergency nationalised RBS. AIB blew up Ireland quite badly; Kaupthing even worse for Iceland, and so on down to Cyprus where the depositors were deemed to "dirty money" to get a bailout and actually took losses. I also don't think people have considered what the alternative society of "contagion" would have looked like, where enough banks had failed that a significant fraction of companies could not make payroll and millions of Americans suddenly could not buy anything.
- pksebben 4y ago
  my problem with this, and I think others share it, is that nothing came out of the situation to fix the conditions that made it happen. The best we got was the Volcker rule (RIP). and even that wasn't nearly enough. If you're "too big to fail" you're _too fucking big_.

Aaronontheweb 4y ago

That's if you ignore the secondary effects: "moral hazard," knowing that if you become big enough to create political waves in the event that you fail you can continue to gamble with depositor money, make your annual bonus, and safely be rescued by Federal depositor backstop / bailout in the event that you eventually go tits up. I wonder if that'll ever happen again after 2008...

KptMarchewa 4y ago
What they did with SVB prevents this thinking. Make the depositors whole, wipe out shareholders, prosecute the executives.
- Aaronontheweb 4y ago
  Not really - rewriting the rules (FDIC insurance limits) midway through because SVB's own depositors yelled "bank run!" loud enough is still moral hazard. Do I need to make sure I bank with an institution that Jason Calcanis, Mark Cuban, et al use so I can insure my deposits with their political / popular leverage?
  - criley2 4y ago
    It's hardly a rewrite, everyone knows that your deposits with the big 5 are already 100% "too big too fail" anyway. The only change is that some smaller organizations might also get the same unspoken benefit that the big 5 already enjoy. This keeps them competitive, and as the US Gov and many folks noted, if they did not do this, everyone would flee to the Big 5 and regional/community banking would be wiped out.
bumby 4y ago
The irony is that "moral hazard" was the excuse used for not bailing out the homeowners directly who were defaulting on mortgages 15 years ago.

cycrutchfield 4y ago

Aside from the moral hazard, you are right. But most of the histrionics about bailouts, particularly the 2008 bailouts, are often based more on feelings than facts.

bumby 4y ago
>are often based more on feelings than facts. This is how it's being framed on many news networks as well. But I don't know if I quite buy it; maybe you can clarify. The 2008 was considered "different" because it was essentially driven by a bunch of bad bets on sub-prime mortgages. In contrast, this current one is being framed as just ensuring depositors. But that assurance is needed because the banks made bad bets on the bond market. Are the two really fundamentally different?
- cycrutchfield 4y ago
  Well, when SVB got its “bailout”, what happened to its shareholders? They got wiped out. The people that made the bad bets didn’t get rescued.

roenxi 4y ago

Those are lies on the level of when the Russians do their tour talking about how they are defending themselves against Ukrainian aggression. If there was that much money to be made, it doesn't make any sense for the government to be involved sucking out all the profits. Bank creditors aren't idiots, they can be persuaded to wait a few years for a $15.3 billion bumper profit if the alternative is losing all their money. The issue is someone is pulling out smoke and mirrors in a complex situation to pretend that everything is going ok. Probably involving, to stick to theme, money printing.

D_Alex 4y ago
I don't think "the Russians" actually said that. Maybe you should use a different example, like when the US lied at the United Nations about WMDs in Iraq.
- SenHeng 4y ago
  > Russian Foreign Minister Sergei Lavrov made headlines over the weekend when his claim the Ukraine war was “launched against” Russia provoked laughter from the audience during a forum in India. But I was in the room and can report he also received applause and indifference. https://theconversation.com/russias-foreign-minister-got-laughter-cheers-and-shrugs-in-india-outrage-over-the-war-isnt-universal-201163 https://theconversation.com/russias-foreign-minister-got-lau...
- vel0city 4y ago
  Putin absolutely used language suggesting these actions were defensive against "fundamental threats" and in reaction to "the military machine is moving and, as I said, is approaching our very border". Putin puts the war against Ukraine as "a matter of life and death, a matter of our historical future as a nation" and a threat "to the very existence of our state and to its sovereignty." He even literally states "we are acting to defend ourselves." Putin himself has absolutely, 100%, without question, very publicly stated they needed to go to war against Ukraine to defend themselves against Western aggression. He absolutely framed it as a completely defensive action. Those words aren't some misquote or mistranslation or taken out of context, they're hosted on the Kremlin's website. I guess you don't consider Putin to be a Russian? http://en.kremlin.ru/events/president/news/67843 http://en.kremlin.ru/events/president/news/67843 https://www.atlanticcouncil.org/blogs/new-atlanticist/markup/putin-speech-ukraine-war/ https://www.atlanticcouncil.org/blogs/new-atlanticist/markup... Please quit spreading lies.

zug_zug 4y ago

fascinating, where can I read more about that?

slv77 4y ago

Nobody profits when a bad loan is made. Money that represents a promise of future spending made to someone who saved instead spent is destroyed. The only question is who is going to pay the cost. In 2008 the wizzes of the banking industry had made billions of bad loans. Who paid for it? Anybody who saved instead of spent and invested instead of speculated. In other words, almost all of us did. Once all the pluses and minuses are canceled out we’re all poorer for it. Saying anything else is putting lipstick on a pig.

700000thMistake 4y ago
[dead]

naasking 4y ago

> Ironically, the bank bailouts of 2008 were a wild success. The TARP program was paid back in under a year at a decent profit to the taxpayer. I'm not sure that getting paid back by reinflating a bubble is the net positive you think.

fallingknife 4y ago

The only reason the banks were around to pay back TARP is because the US government declared them to be "too big to fail," essentially guaranteeing their debts. So the government put the taxpayer on the hook for all the liabilities of the banking system in exchange for a $15.3 billion profit. I would call that a lot of things, but a "wild success" isn't one of them.

ben30 4y ago

In uk it wasn’t though. Taken from Wikipedia regarding uk bail out. As at October 2021, the UK Office for Budget Responsibility reported the cost of these interventions as £33 billion

pjc50 4y ago
Ireland took an even bigger hit from Anglo-Irish, although in that case Sean Quinn did actually go to jail.

jjoonathan 4y ago

Was it paid back? Or was it "paid back" in the same way that a father might let his deadbeat son roll a loan so he can lie to his golf buddies about it? https://fred.stlouisfed.org/series/WALCL https://fred.stlouisfed.org/series/WALCL It sure seems to me that at least $1T stayed printed. Of course, that amount seems positively quaint now.

comte7092 4y ago
That graph isn’t a graph of TARP assets…
- jjoonathan 4y ago
  That's my point. It's misleading to zoom in on TARP because TARP is only part of the story. Swapping one asset for another without reducing the net position is a dumb trick and it's embarrassing that so many people fall for it. Looking at the Fed's balance sheet is a simple way to track the big picture.
  - comte7092 4y ago
    Those were different program that frankly had nothing to do with each other policy wise. In one instance, the fed took over assets to backstop troubled banks, in the other, it sought to increase the monetary base. It’s not a “dumb trick” it’s basic monetary policy.
    - jjoonathan 4y ago
      It stops being a dumb trick the moment the Fed manages to wind down the balance sheet (i.e. never). Until then, the Fed is just the bagholder of last resort, and talk of a money printer is more accurate than talk about backstops and the monetary base.
      - comte7092 4y ago
        They’ve literally been winding down the balance sheet for the last ten months.

blululu 4y ago

15B profit on 420B investment amounts 3.5% return YoY. I wouldn't brag about that sort of return. Yes TARP worked to forestall an even greater collapse. People were less upset that the government acted as an emergency creditor than by the fact that the people who made the mess of 2008 got bonuses paid out of that federal backup (a bonus is given for good performance - which was obviously not happening in 2008).

pjc50 4y ago

It is annoying that this is currently grey despite being entirely correct for the US. The banking rescue worked. A few crimes did get swept under the rug, like "robo-signing", but those weren't directly linked to TARP. Other countries did less well out of the event. The UK still owns the emergency nationalised RBS. AIB blew up Ireland quite badly; Kaupthing even worse for Iceland, and so on down to Cyprus where the depositors were deemed to "dirty money" to get a bailout and actually took losses. I also don't think people have considered what the alternative society of "contagion" would have looked like, where enough banks had failed that a significant fraction of companies could not make payroll and millions of Americans suddenly could not buy anything.

pksebben 4y ago
my problem with this, and I think others share it, is that nothing came out of the situation to fix the conditions that made it happen. The best we got was the Volcker rule (RIP). and even that wasn't nearly enough. If you're "too big to fail" you're _too fucking big_.