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It wasn't about cronyism: they couldn't "bail out" specific, failing banks or else it would be obvious to stakeholders where the "bad" banks were. Every bank t
by tatsuke95 14y ago
It wasn't about cronyism: they couldn't "bail out" specific, failing banks or else it would be obvious to stakeholders where the "bad" banks were. Every bank that would have received funds under these circumstances would be susceptible to a run. It was a crafty play, done against the will of the some of the banks.
The industry needed an infusion of cash, and they spread it around a bunch of the biggest players.
- sageikosa 14y agoThe bad banks got to hide behind the good banks, the good banks can't possibly win under such a scenario, since they get lumped in as "the banks" by the masses that don't care about specific behavior but craft their ideas based on "industry". Ford ticked up after not taking a handout, larger well governed banks had no such opportunity. Deposits up to $100K (or thereabouts) were insured by the FDIC, so even under a run, the savers in the bad banks were not going to be left high and dry; and perhaps wiser about where they put their money in the future. Perhaps the Federal Government didn't want to see the FDIC invoked. Instead, a precedent was set; bad behavior was not punished (by way of market action), and good behavior is tainted by association (via political demonizing).