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We shouldn't let banks fail and destroy the economy. A key difference here is that bond and equity holders are wiped out, which helps reduce moral hazard. The
by smugma 3y ago
We shouldn't let banks fail and destroy the economy.
A key difference here is that bond and equity holders are wiped out, which helps reduce moral hazard.
The broader concern is the privatization of profits while losses are absorbed by the government/public.
- deleted 3y ago[deleted]
- astrange 3y ago> The broader concern is the privatization of profits while losses are absorbed by the government/public. It seems like people just say this happened no matter what actually happens? Equityholders are always wiped out when the government takes over a bank or business. Not sure about bondholders, but the point of backing up a bank is to prevent losses to the public of their bank accounts and payrolls. For something like covid airline bailouts, equityholders got support but that's because the airlines have unions, not because the government loves airline shareholders.