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Note that the majority of bad 2008 loans were from a spike in financial business lending not personal lending. https://en.m.wikipedia.org/wiki/Subprime_mortgag

Note that the majority of bad 2008 loans were from a spike in financial business lending not personal lending. https://en.m.wikipedia.org/wiki/Subprime_mortgage_crisis#/media/File%3AUS_Private_Debt_to_GDP_by_Sector.png https://en.m.wikipedia.org/wiki/Subprime_mortgage_crisis#/me... You’ve probably heard of private equity buying companies, loading them with debt, transferring money to the parent and bankrupting the company and wondering why banks give loans to private equity when we know this playbook. Well the bank loans are guaranteed ultimately by Freddie/Fannie. There’s no risk here and everyone but productive members of society win here. It’s still ongoing too.

kasey_junk 2y ago
What are you talking about? Fannie and Freddie don’t buy loans for businesses other than some commercial real estate. They certainly don’t back most private equity plays.
downrightmike 2y ago
I've heard about it because that's how we lost American Manufacturing like SunBeam, sold off for parts. But hey deregulation and greed was good in the 80's, and no one who should have stopped it, did.
- parineum 2y ago
  Do you think greedy people would sell off a companies' assets for parts if that company was profitable? They don't buy healthy companies, the people that do that are looking for failing companies that they can buy for pess than their assets are worth.
  - c6400sc 2y ago
    The question is not profitable. The question is can they be MORE PROFITABLE than they currently are. Some companies are unprofitable and easy targets. Others are mildly profitable, but PE can lever up their investments to goose MORE out of them, resilience and survivability be damned.
  - mdorazio 2y ago
    That's literally what Jack Welch did with General Electric in the 80s and 90s, and all the Boomers loved him for it. And yes, PE firms do it all the time as well - it's actually pretty rare for PE to acquire a large company that is actually failing. More often, it's one that is doing OK but not great. A good example is Toys R Us. Net earnings were around $100M in 2004 when PE bought it out and ruined it.
  - downrightmike 2y ago
    At that point, it didn't matter, the investors expected the chopping block to keep rolling, because that was the zeitgeise, and making more deals meant you could make more, until you run out of companies to kill or the times change.

kasey_junk 2y ago

What are you talking about? Fannie and Freddie don’t buy loans for businesses other than some commercial real estate. They certainly don’t back most private equity plays.

downrightmike 2y ago

I've heard about it because that's how we lost American Manufacturing like SunBeam, sold off for parts. But hey deregulation and greed was good in the 80's, and no one who should have stopped it, did.

parineum 2y ago
Do you think greedy people would sell off a companies' assets for parts if that company was profitable? They don't buy healthy companies, the people that do that are looking for failing companies that they can buy for pess than their assets are worth.
- c6400sc 2y ago
  The question is not profitable. The question is can they be MORE PROFITABLE than they currently are. Some companies are unprofitable and easy targets. Others are mildly profitable, but PE can lever up their investments to goose MORE out of them, resilience and survivability be damned.
- mdorazio 2y ago
  That's literally what Jack Welch did with General Electric in the 80s and 90s, and all the Boomers loved him for it. And yes, PE firms do it all the time as well - it's actually pretty rare for PE to acquire a large company that is actually failing. More often, it's one that is doing OK but not great. A good example is Toys R Us. Net earnings were around $100M in 2004 when PE bought it out and ruined it.
- downrightmike 2y ago
  At that point, it didn't matter, the investors expected the chopping block to keep rolling, because that was the zeitgeise, and making more deals meant you could make more, until you run out of companies to kill or the times change.