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Sure the government made money by dropping interest rates to zero and forcing safe money into every form of other investment. However that also caused the grea

Sure the government made money by dropping interest rates to zero and forcing safe money into every form of other investment. However that also caused the greatest gap in income inequality ever. Those with assets got extremely wealthy and those living paycheck to paycheck got fucked. This is why no one can afford a house in the Bay Area unless you had money in stocks or real estate already.

giantg2 3y ago
"This is why no one can afford a house in the Bay Area unless you had money in stocks or real estate already." The fact that people could afford houses in other areas seems to support that group-think and constrained supply is really at the heart of that issue. Also, affordability was an issue prior to the crisis (well, true affordability because the loans were too easy to get for many).
- dboreham 3y ago
  I moved to the Bay Area in 1996 and there was no way I could afford to buy a house there then.
  - andrewljohnson 3y ago
    Did you have any savings? At what point in your career were you? Anywhere in the Bay Area, or in the neighborhoods you were willing to live in? What weee your constraints?
  - xhkkffbf 3y ago
    Yup. Affordability in area is always hard because the companies pay the minimum to get someone to walk through the door. When you're new, you're competing for work with people who already have housing and are looking for a new job. So they can underbid you.
hluska 3y ago
A large number of mainstream economists believe that without TARP the entire global banking system would have collapsed, credit would have dried up and a depression would have been long lasting. This is one of those situations where there was no good way out. The least awful option ended up being the best out. The real issue was that Timothy Geithner, Ben Bernanke and Henry Paulson could not effectively communicate the economic issues during an election. As much as I respect John McCain, his decision to end his campaign to ‘return to Washington’ was an unmitigated disaster. Both for the economy as a whole and for that manifestation of the Republican Party. We can draw a direct line from that stunt through the Tea Party and into today’s current populist climate. Long rambling explanation short, I don’t believe there were other options. Decisions were made in real time and in many cases, they had to be made overnight. Two major deals that would have dramatically altered the response to the subprime crisis both fell apart over night on a weekend. Ben Bernanke was (and remains) one of the world experts on the Great Depression. His education lead him to take policy steps that would prevent another Great Depression. Maybe we’re worse off, maybe we’re not. But I’m glad I didn’t live my entire thirties under a depression.
- noja 3y ago
  What about the "and afterwards" part, where the banks that were too big to fail were split up, and regulation was improved?
  - JumpCrisscross 3y ago
    > What about the "and afterwards" part, where the banks that were too big to fail were split up, and regulation was improved? Whether TBTF banks should be split up is still being debated. With size comes resilience (and fewer books to look over). In terms of improved regulation, the fact that we're less than a year out from the second, third and fourth largest bank failures in our nation's history with seemingly no memory of it seems to speak for itself [1]. [1] https://en.wikipedia.org/wiki/List_of_largest_bank_failures_in_the_United_States https://en.wikipedia.org/wiki/List_of_largest_bank_failures_...
  - hluska 3y ago
    I don’t understand your point, but yes, aspects of the US financial industry were improved as a result of the 2008 crisis. That happened because of roughly two years of work by congressional and senate oversight committees. Other things (ie - derivatives) were not properly regulated. If you’re interested in what one form of regulation could have looked like, you should look up Brooksley Born. Most specifically, what happened to her when she proposed regulation. Ben Bernanke spent so much time testifying and was so bothered by his experience that he used to be a registered Republican. Now he’s independent.
noobermin 3y ago
Alright I'm sympathetic and also think fuck the banks but really how did TARP cause thr current housing crisis?
- tim333 3y ago
  I think the argument is 0% interest rates caused the housing crisis, not TARP.
- pas 3y ago
  https://www.fullstackeconomics.com/p/the-2000s-housing-bubble-was-greatly-exaggerated https://www.fullstackeconomics.com/p/the-2000s-housing-bubbl...
  - no_wizard 3y ago
    I buy that if you look at today's housing issues and trace it back, it would make sense that we never ramped housing construction back up, but this article glosses over many systematic issues that existed back then and today. For example, the author notes: >To me, the strongest piece of evidence in favor of the recession causing the housing crisis rather than the housing crisis causing the recession is the fact that prices snapped back up, in similar geographic configuration, after the economy has recovered This is unsurprising, its where all the good paying jobs still are. The centers of employment as it were, are in the areas with the most housing demand, and spillover from that will drive adjacent markets up as people at the top and wanting to move sell and move to LCOL areas. Fundamentally this is the issue with housing that I think is readily apparent to anyone who has looked at the market with any seriousness. Now with w/r/t 2008 it was faulty mortgages and mortgage backed securities that caused the recession, not housing construction. That is accurate to say, if you want to paint in broad strokes, but the defaults on NINJA loans and variable mortgages leads to a depression in home buying as credit tightens up and losses mount. I don't see how you don't end up with some depression in the housing market as a result of this, even if its uneven in whom it affects. Alot of collateral is tied up in real estate and that assumes "up and to the right" value of real estate holds constant. You have to square that too. In the US, real estate is in a tug of war between being two views: One is as an investment vehicle / asset. The other is as a commodity to which we all need to live because its required for housing. Those two don't square very well. One thing is for sure, homeowners want the value of their home to appreciate, and they fight tooth and nail to make sure it does. I think in context, we as a society over-invested in "real estate is an asset and can be your nest egg cause they ain't making more!" type narratives, and would do well if we shifted toward "real estate is only as valuable as it is used productively for society"[0] [0]: In reference to Georgism: https://en.wikipedia.org/wiki/Georgism https://en.wikipedia.org/wiki/Georgism

giantg2 3y ago

"This is why no one can afford a house in the Bay Area unless you had money in stocks or real estate already." The fact that people could afford houses in other areas seems to support that group-think and constrained supply is really at the heart of that issue. Also, affordability was an issue prior to the crisis (well, true affordability because the loans were too easy to get for many).

dboreham 3y ago
I moved to the Bay Area in 1996 and there was no way I could afford to buy a house there then.
- andrewljohnson 3y ago
  Did you have any savings? At what point in your career were you? Anywhere in the Bay Area, or in the neighborhoods you were willing to live in? What weee your constraints?
- xhkkffbf 3y ago
  Yup. Affordability in area is always hard because the companies pay the minimum to get someone to walk through the door. When you're new, you're competing for work with people who already have housing and are looking for a new job. So they can underbid you.

hluska 3y ago

A large number of mainstream economists believe that without TARP the entire global banking system would have collapsed, credit would have dried up and a depression would have been long lasting. This is one of those situations where there was no good way out. The least awful option ended up being the best out. The real issue was that Timothy Geithner, Ben Bernanke and Henry Paulson could not effectively communicate the economic issues during an election. As much as I respect John McCain, his decision to end his campaign to ‘return to Washington’ was an unmitigated disaster. Both for the economy as a whole and for that manifestation of the Republican Party. We can draw a direct line from that stunt through the Tea Party and into today’s current populist climate. Long rambling explanation short, I don’t believe there were other options. Decisions were made in real time and in many cases, they had to be made overnight. Two major deals that would have dramatically altered the response to the subprime crisis both fell apart over night on a weekend. Ben Bernanke was (and remains) one of the world experts on the Great Depression. His education lead him to take policy steps that would prevent another Great Depression. Maybe we’re worse off, maybe we’re not. But I’m glad I didn’t live my entire thirties under a depression.

noja 3y ago
What about the "and afterwards" part, where the banks that were too big to fail were split up, and regulation was improved?
- JumpCrisscross 3y ago
  > What about the "and afterwards" part, where the banks that were too big to fail were split up, and regulation was improved? Whether TBTF banks should be split up is still being debated. With size comes resilience (and fewer books to look over). In terms of improved regulation, the fact that we're less than a year out from the second, third and fourth largest bank failures in our nation's history with seemingly no memory of it seems to speak for itself [1]. [1] https://en.wikipedia.org/wiki/List_of_largest_bank_failures_in_the_United_States https://en.wikipedia.org/wiki/List_of_largest_bank_failures_...
- hluska 3y ago
  I don’t understand your point, but yes, aspects of the US financial industry were improved as a result of the 2008 crisis. That happened because of roughly two years of work by congressional and senate oversight committees. Other things (ie - derivatives) were not properly regulated. If you’re interested in what one form of regulation could have looked like, you should look up Brooksley Born. Most specifically, what happened to her when she proposed regulation. Ben Bernanke spent so much time testifying and was so bothered by his experience that he used to be a registered Republican. Now he’s independent.

noobermin 3y ago

Alright I'm sympathetic and also think fuck the banks but really how did TARP cause thr current housing crisis?

tim333 3y ago
I think the argument is 0% interest rates caused the housing crisis, not TARP.
pas 3y ago
https://www.fullstackeconomics.com/p/the-2000s-housing-bubble-was-greatly-exaggerated https://www.fullstackeconomics.com/p/the-2000s-housing-bubbl...
- no_wizard 3y ago
  I buy that if you look at today's housing issues and trace it back, it would make sense that we never ramped housing construction back up, but this article glosses over many systematic issues that existed back then and today. For example, the author notes: >To me, the strongest piece of evidence in favor of the recession causing the housing crisis rather than the housing crisis causing the recession is the fact that prices snapped back up, in similar geographic configuration, after the economy has recovered This is unsurprising, its where all the good paying jobs still are. The centers of employment as it were, are in the areas with the most housing demand, and spillover from that will drive adjacent markets up as people at the top and wanting to move sell and move to LCOL areas. Fundamentally this is the issue with housing that I think is readily apparent to anyone who has looked at the market with any seriousness. Now with w/r/t 2008 it was faulty mortgages and mortgage backed securities that caused the recession, not housing construction. That is accurate to say, if you want to paint in broad strokes, but the defaults on NINJA loans and variable mortgages leads to a depression in home buying as credit tightens up and losses mount. I don't see how you don't end up with some depression in the housing market as a result of this, even if its uneven in whom it affects. Alot of collateral is tied up in real estate and that assumes "up and to the right" value of real estate holds constant. You have to square that too. In the US, real estate is in a tug of war between being two views: One is as an investment vehicle / asset. The other is as a commodity to which we all need to live because its required for housing. Those two don't square very well. One thing is for sure, homeowners want the value of their home to appreciate, and they fight tooth and nail to make sure it does. I think in context, we as a society over-invested in "real estate is an asset and can be your nest egg cause they ain't making more!" type narratives, and would do well if we shifted toward "real estate is only as valuable as it is used productively for society"[0] [0]: In reference to Georgism: https://en.wikipedia.org/wiki/Georgism https://en.wikipedia.org/wiki/Georgism