4 ms·

The banks too profited handsomely from TARP, thereby creating a huge moral hazard. The government gave the banks money, which they used to make profits, AND the

The banks too profited handsomely from TARP, thereby creating a huge moral hazard. The government gave the banks money, which they used to make profits, AND then returned money to the government. Let that sink in for a second, the banks sunk the economy, and the government helped them make huge profits.

rhino369 12y ago
TARP didn't wipe out the massive losses the banks suffered because of financial crisis. It just allowed them to survive it. The banks who really fucked up were all sold, essentially at gunpoint, to banks who were still solvent. Those banks were sold for pennies on dollar compared to what they were priced at months before. Of course, without government intervention, they'd get nothing in bankruptcy. I think losing 95% of your investment is enough to avoid huge moral hazard. Society benefits because letting them fail sinks the economy much further.
- Zigurd 12y ago
  The positive aspects of saving a banking system don't directly cancel out the negative aspects of creating moral hazard by doing it in a way that rewards TBTF banks. There were multiple options for saving the US banking system, which was insolvent as a whole, since the supposedly not-insolvent banks would have gone down the tubes instantly had any of the larger insolvent banks been allowed to fail, due to their derivatives exposure and other counter-party risk. For example, the banks could have been nationalized, and the charade of continuing large management bonuses could have been avoided. What we got as a result of TARP and related bailout approaches is an unrepentant risky TBTF system that could explode again, and a compensation structure that fuels income inequality. Feh.
- rational-future 12y ago
  You are assuming the banks that sold had different owners than the banks that bought them.

4 ms·

The banks too profited handsomely from TARP, thereby creating a huge moral hazard. The government gave the banks money, which they used to make profits, AND the

by littletimmy 12y ago

rhino369 12y ago
TARP didn't wipe out the massive losses the banks suffered because of financial crisis. It just allowed them to survive it. The banks who really fucked up were all sold, essentially at gunpoint, to banks who were still solvent. Those banks were sold for pennies on dollar compared to what they were priced at months before. Of course, without government intervention, they'd get nothing in bankruptcy. I think losing 95% of your investment is enough to avoid huge moral hazard. Society benefits because letting them fail sinks the economy much further.
- Zigurd 12y ago
  The positive aspects of saving a banking system don't directly cancel out the negative aspects of creating moral hazard by doing it in a way that rewards TBTF banks. There were multiple options for saving the US banking system, which was insolvent as a whole, since the supposedly not-insolvent banks would have gone down the tubes instantly had any of the larger insolvent banks been allowed to fail, due to their derivatives exposure and other counter-party risk. For example, the banks could have been nationalized, and the charade of continuing large management bonuses could have been avoided. What we got as a result of TARP and related bailout approaches is an unrepentant risky TBTF system that could explode again, and a compensation structure that fuels income inequality. Feh.
- rational-future 12y ago
  You are assuming the banks that sold had different owners than the banks that bought them.