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Not on the main island:
You are equating a person missing mortgage to huge banks failing, seriously? Just google up "what is banks weren't bailed out?" and read up the other side of the story.And then one thinks what happens to the average Joe who misses 3 payments on his mortgage...
The world is stupid.
There's a point to be had though that we engage in a predominantly capitalist system wherein the rich are therefore a lot more likely to have their own mistakes and failings go unpunished than those who don't have any financial safety nets. If you're on the left and genuinely want to reign the banks in, then yeah, fair enough, but if you're on the right and want to have a free market capitalistic state with no government intervention, then you have to be willing to deal with the consequences of that. So what you largely end up with is a system where banks and the like can run wild with the knowledge that if they fail, they won't suffer from the pitfalls of capitalism, even though they've made their fortune by benefiting from its advantages.You are equating a person missing mortgage to huge banks failing, seriously? Just google up "what is banks weren't bailed out?" and read up the other side of the story.
It's cutting the nose to spite the face. Bailing out banks might have prevented a broader spillover to rest of economy and helped mitigate. Considering the alternative, you won't find any central bank who'll risk the consequences of what may happen if they aren't bailed out.
There is a big difference between punishing guilty vs preventing more turmoil. Banks as such are integral to the society. Highly paid bankers, probably not. I support the bailout fully...but still think the personal consequences to the bankers, rating agencies were not even close to what they deserved.
Is it any different in socialism? Or any other ism?There's a point to be had though that we engage in a predominantly capitalist system wherein the rich are therefore a lot more likely to have their own mistakes and failings go unpunished than those who don't have any financial safety nets.
Governments do that all the time. Waste taxpayers money in wars, building walls and assorted stuff. Bailout ain't the only waste in history.So what you largely end up with is a system where banks and the like can run wild with the knowledge that if they fail, they won't suffer from the pitfalls of capitalism, even though they've made their fortune by benefiting from its advantages.
Well...the whole point of socialism is that you'll see people being bailed out across the board, so to speak. So while the government will obviously step in to ensure a bank doesn't fail if it's going to hurt the common person, if they're truly socialist they'll also look to step in and help poorer people when they're struggling as well. Naturally it's not so simple in practice, but my critique here is that the problem with our current structure is that while we mostly live in capitalist societies, a lot of rich and powerful figures within the finance industry were essentially able to use capitalism for their own self-benefit without ever then suffering the negative consequences which can come with the free market when you fail. Whereas those with less power are punished to a far greater extent and don't find themselves getting bailed out to the same level if they fail.Is it any different in socialism? Or any other ism?
Governments do that all the time. Waste taxpayers money in wars, building walls and assorted stuff. Bailout ain't the only waste in history.
It's not an excuse, but I'd be pro more regulations and pro more accountability. Which is what is happening now.
This is a massive false dichotomy. It presents this false idea that the only two possible options were the exact bailouts that happened or and only or not doing anything. That was the extortionate lie of the finance industry - give us what we want or the whole economy is fecked.You are equating a person missing mortgage to huge banks failing, seriously? Just google up "what is banks weren't bailed out?" and read up the other side of the story.
It's cutting the nose to spite the face. Bailing out banks might have prevented a broader spillover to rest of economy and helped mitigate. Considering the alternative, you won't find any central bank who'll risk the consequences of what may happen if they aren't bailed out.
There is a big difference between punishing guilty vs preventing more turmoil. Banks as such are integral to the society. Highly paid bankers, probably not. I support the bailout fully...but still think the personal consequences to the bankers, rating agencies were not even close to what they deserved.
It was either moving back to status quo or jumping blind into a rolling out a unproven and untested new solution which if didn't work will lead to meltdown on a far more massive scale. Hank Paulson clearly says that the actions were on side of caution. No sane person would enter into a gamble of such massive scale with consequence unknown...esp with a market already in turmoil. After all these years, do we even have a firm idea of what the other options and their impact might have been? Don't think so. A failure of RBS or BoA would be far more catastrophic on it's own and that's not even considering what a loss of confidence in banking sector would do as a ripple effect.This is a massive false dichotomy. It presents this false idea that the only two possible options were the exact bailouts that happened or and only or not doing anything. That was the extortionate lie of the finance industry - give us what we want or the whole economy is fecked.
Preach it, man.This is a massive false dichotomy. It presents this false idea that the only two possible options were the exact bailouts that happened or and only or not doing anything. That was the extortionate lie of the finance industry - give us what we want or the whole economy is fecked.
What this fallacy fails to recognize is that government could have formulated their billion/trillion bailout much differently to benefit the poor and working class who got screwed by the greed of the finance. 4 million people lost their homes while banks and other major corporate entities received all the benefits. Instead of those responsible paying, the most vulnerable paid their cost for them. The Obama Admin could have structured the bailout in such a way that those 4 million families didn't lose their homes to foreclosure. You stimulate the economy and save the irresponsible banks by the bottom up not the top down. You don't give the banks billions in free money because they just extorted the country. The problem is the US government has been bailing out corporations since the 1980s from the top down allowing the big corps and the banks to suck down all the profits while passing along all the risks.
Absolutely we did. In fact we had a firmer idea of how bottom up would have benefited the people than what the elite's chosen top-down plan at the time. And considering what a disaster giving hundreds of billions of undeserved free money to the financial sector and mega-conglomerates has become now especially when combined with another round of unnecessary and greedy tax cuts for the rich it, its clear that the top-down bailout was about the worst possible option to the financial crisis.It was either moving back to status quo or jumping blind into a rolling out a unproven and untested new solution which if didn't work will lead to meltdown on a far more massive scale. Hank Paulson clearly says that the actions were on side of caution. No sane person would enter into a gamble of such massive scale with consequence unknown...esp with a market already in turmoil. After all these years, do we even have a firm idea of what the other options and their impact might have been?
You are really missing the point here and this argument is too full of fallacies for me to breakdown completely at the moment. You just made a half dozen unproven assertions and the bold ignores my original point.Don't think so. A failure of RBS or BoA would be far more catastrophic on it's own and that's not even considering what a loss of confidence in banking sector would do as a ripple effect.
The objective at that time was not to stimulate the economy but give it confidence. It was a time of stress of unclear consequences and the actions taken were the right one in those set of circumstances. You can do a lot of armchair economizing in hindsight, but the only mistake done was on how the bailout was structured. The intention behind the bailout was for it to be used to boost the mortgage market and give it confidence more, but the money wasn't used to that effect. It did work in stabilizing the markets, but failed to mitigate the impact of the crisis.
https://ritholtz.com/2010/08/bailout-counter-factual/Barry Ritholtz said:it is by definition a hypothetical counter-factual. Rather, it is the counter-factual Blinder/Zandi chose to use: “What would the economy look like now if we had done nothing?”
Instead, I propose a better counter-factual: “What if we had done the right thing, instead of nothing — or the wrong thing?”
A quick definition first: The term “counter-factual” is a term of art often misunderstood. The definition of counter-factual is a “what-if” — counter-factuals explore historical incidents by extrapolating an alternative time line:
-What-if Chrysler was not bailed out in 1980?
-What-if JPM was not guaranteed $29B of Bear’s liabilities?
-What if Citi and BofA were put into reorg/receivership?
-What if AIG’s counter-parties were not made whole 100 cents on the dollar?
We don’t have alternative universe laboratories to run control bailout experiments, but we can imagine the alternative outcomes if different actions were taken...
AIG ? There never was an implicit government guarantee that all counter-parties dealing with AIG-Financial Products — a giant leveraged structured finance hedge fund hiding under the skirt of the regulated insurer — would be made whole. But the Bush/Paulson/Bernanke bailout created one. Instead, AIG-FP should have been carved out for dissolution/wind down, while the insurer could have continued to exist on its own. AIG would have had the liability for the government’s costs, but the counter parties? They would have gotten zero. If you go to Vegas and shoot craps in the alley way behind the casino, don’t expect the gaming commission to collect your winnings. But that is what we did with AIG..
While we certainly can compare what was done with doing nothing, the proper counter-factual is to compare what was done with what should have been done.
Absolutely we did. In fact we had a firmer idea of how bottom up would have benefited the people than what the elite's chosen top-down plan at the time.
What are these alternative proposals that were up there at that time? Any links?The government could just as easily have prevented BoA failing WHILE ALSO saving 4 million families' homes.
I said it was the safest of all solutions. Never said it was the best. Getting back to status quo and mitigating the turmoil should have been the priority and it was.as the best of all possible solutions.
That counterfactual argument is insane. Who know what the "right thing" is? If AIG or BofA or RBS weren't bailed out, I'm sure it would be far worse. Bank of America had 58 million customers. And if a bank of that magnitude were let to fail, the public would lose confidence in banks per se and you'd see a run on withdrawals on Chase and every other bank...causing just more and more instability. There is no fallacy here...just plain common sense.Instead, I propose a better counter-factual: “What if we had done the right thing, instead of nothing — or the wrong thing?”
Hank Paulson said:How would the failing of these banks and non-banks wreck the economy?
“Just before we guaranteed the money markets, I think that was the time I saw it the clearest. Because 30 million Americans had deposits in money market funds totaling $3.5 trillion. If there is a panic and a run on the money market funds, not only did those people get hurt, but those funds were used to finance short-term operations of major companies.
I had a call from one AAA company, where the CEO told me the treasurer said we’re not going to be able to make our $800 million quarterly dividend payment. You could just see very quickly if the big companies don’t have the financing to pay their suppliers how that ripples through the economy. Small companies go down.”
The way I explain it often is that, credit was frozen. And if credit was frozen then you don’t have mortgages, you don’t have credit cards, you don’t have loans to start businesses to keep businesses, loans to send kids to school etc.”
Pillow. I literally gave you two links in the post you replied to. This is what I feel the problem is. I literally just gave you links that already counter everything you just wrote but you didn't even bother reading.What are these alternative proposals that were up there at that time? Any links?
Do you have proof of the bolded or is that just received wisdom?I said it was the safest of all solutions. Never said it was the best. Getting back to status quo and mitigating the turmoil should have been the priority and it was.
The Iceland one, seriously? You really think letting US stock markets crash and letting the $ devalue should have been the right way forward? They let all foreign creditors and holders fail. Do you even realize what would happen if foreign investors lose faith in US and USD? You'd just be triggering a broader worldwide effect unlike anything Iceland could ever dream of. It's a absolute disaster of a example to make in this situation.Pillow. I literally gave you two links in the post you replied to. This is what I feel the problem is. I literally just gave you links that already counter everything you just wrote but you didn't even bother reading.
Do you have proof of the bolded or is that just received wisdom?
See Paulson interview above. Same happened in UK too. And that's why the "too big to fail" came into picture. Lehmann was let go. Northern Rock was let go. But BofA and RBS were not. Because of scale and the systemic ripple effects would be far more damaging. And providing we break up the too big to fail entities into smaller chunks, we can reduce the need for bailout and let them fail if the perform badly.Do you have proof of the bolded or is that just received wisdom?
What is extra funny here is that the same WS cnuts who scream "communism!" every time the state intervenes with regulations were only too fecking happy for some commie-style intervention after they fecked up.This is a massive false dichotomy. It presents this false idea that the only two possible options were the exact bailouts that happened or and only or not doing anything. That was the extortionate lie of the finance industry - give us what we want or the whole economy is fecked.
What this fallacy fails to recognize is that government could have formulated their billion/trillion bailout much differently to benefit the poor and working class who got screwed by the greed of the finance. 4 million people lost their homes while banks and other major corporate entities received all the benefits. Instead of those responsible paying, the most vulnerable paid their cost for them. The Obama Admin could have structured the bailout in such a way that those 4 million families didn't lose their homes to foreclosure. You stimulate the economy and save the irresponsible banks by the bottom up not the top down. You don't give the banks billions in free money because they just extorted the country. The problem is the US government has been bailing out corporations since the 1980s from the top down allowing the big corps and the banks to suck down all the profits while passing along all the risks.
*sigh* You didn't even read that the other article let alone spend the time actually thinking about these issues before replying. I guess I'll just link for posterity. I love how you think bailing out the average person first is such a horrible idea for everything. You are literally arguing there was no way to save 4 million family homes but we absolutely had to save all the fecking selfish cnuts who caused the crisis billions of ill-gotten profits.The Iceland one, seriously? You really think letting US stock markets crash and letting the $ devalue should have been the right way forward? They let all foreign creditors and holders fail. Do you even realize what would happen if foreign investors lose faith in US and USD? You'd just be triggering a broader worldwide effect unlike anything Iceland could ever dream of. It's a absolute disaster of a example to make in this situation.
You literally just repeated the fallacious counter-factual Ritholtz debunked. Have you read Lowenstein and Roubini and Ritholtz?See Paulson interview above. Same happened in UK too. And that's why the "too big to fail" came into picture. Lehmann was let go. Northern Rock was let go. But BofA and RBS were not. Because of scale and the systemic ripple effects would be far more damaging. And providing we break up the too big to fail entities into smaller chunks, we can reduce the need for bailout and let them fail if the perform badly.
Exactly. Its very ironic and revealing when the ill-gotten billions of profits from a hustle are threatened then the "creative destruction" of capitalism is suddenly absolutely unacceptable. Can't let all the execs and c-levels lose their millions-to-billions in personal profits so we have to force the taxpayers to guarantee 100% of bonds and debt from finance but feck those 4 million families that just lose their homes. Trying to save them would break the economy somehow.What is extra funny here is that the same WS cnuts who scream "communism!" every time the state intervenes with regulations were only too fecking happy for some commie-style intervention after they fecked up.
Socialize losses, privatize profits.What is extra funny here is that the same WS cnuts who scream "communism!" every time the state intervenes with regulations were only too fecking happy for some commie-style intervention after they fecked up.
Never said that.All I said was that bailing banks was the right step. Can US have gone extra and bailed out 4 million people? Sure, why not? Never said I'm against it or that it would be a bad idea.I love how you think bailing out the average person first is such a horrible idea for everything. You are literally arguing there was no way to save 4 million family homes but we absolutely had to save all the fecking selfish cnuts who caused the crisis billions of ill-gotten profits.
Yes, I've read it. I just couldn't find any stats to back that assumption up. It's just his opinion ... in hindsight.You literally just repeated the fallacious counter-factual Ritholtz debunked. Have you read Lowenstein and Roubini and Ritholtz?
You missed a few relevant points. I never said the US should have been exactly like Iceland so that's just a strawman. The point is that the Iceland plan was focused on the citizens first. That was the point not that US should have tried to be exactly the same ffs. US also could have had a plan built around the citizens first and the immortal greed entities as only tertiary beneficiaries. That is the point. The entire Paulson plan was built around saving the ill-gotten riches of the finance sector not on doing what was fecking best for the US and World Economy.I have read that article before and have done so again in full before replying. Just saying it is meaningless when applies to US markets. Making an argument that it worked for Iceland so it must work well everywhere discounts the scale, intricacies and complexity of markets and is just plain false extrapolation. Yeah, I fixed a cycle, I should be able to fix a space station...kind of analogy.
Well you implied it by defending the moronic Paulson/'Bernanke plans and acting like no other alternative was possible. You are the one aggressively defending exactly what happened as the best of all possible worlds because you still fail to acknowledge there are numerous better ways to structure such a bailout. We picked the worst - the one that benefited the elites the most.Never said that.All I said was that bailing banks was the right step. Can US have gone extra and bailed out 4 million people? Sure, why not? Never said I'm against it or that it would be a bad idea.
You've read all three of these books?Yes, I've read it. I just couldn't find any stats to back that assumption up. It's just his opinion ... in hindsight.
As I said, there was no 'citizen first' plan by Iceland. This was the only course available to them.You missed a few relevant points. I never said the US should have been exactly like Iceland so that's just a strawman. The point is that the Iceland plan was focused on the citizens first. That was the point not that US should have tried to be exactly the same ffs. US also could have had a plan built around the citizens first and the immortal greed entities as only tertiary beneficiaries. That is the point. The entire Paulson plan was built around saving the ill-gotten riches of the finance sector not on doing what was fecking best for the US and World Economy.
I was replying to this directly that there is no evidence that we'd be ssing any of the above benefits if we hadn't bailed out the banks. It was literally uncharted waters and there is no data to support any of the above. No wonder none of the decision makers wanted to jump blindfolded and gamble with country's economy.Then of course you keep just ignoring the other link I linked.
""The net result of this would have been more turmoil, lower stock prices, and a sharper, but much shorter economic contraction. It would have been painful and disruptive — like emergency surgery is — but its better than an exploded appendix.
And today, we would have a much healthier economy:
• Functioning Banking System: Clean banks not laden with bad paper would be actually making loans to qualified borrowers;
• Healthier Housing Sector: An unsubsidized real estate sector — no tax credits to first time buyers, no ultra low interest rates — would have had much lower prices, with far less bad mortgages floating around. We would be much further along in the foreclosure process. More of the folks who bought more house than they could afford would have moved into homes they can afford;
• Much Smaller Federal Deficits: The trillions of dollars of bailout costs on the books of Uncle Sam would not exist. Not he Tarp, not the government guarantees, not the GSEs, none of it.
• Right-sized Finance Sector: Instead of an outsized banking sector, finance in the US would be more proportional relative to the overall economy. Resources and assets (including programmers, quants, and engineers) would go to more appropriate firms.
• Bond holders Lose: Here is an insane idea: If you lend money to a firm that goes out of business, you lose most of that money (You do get a high priority in the liquidation). The US Taxpayer does not step in to guarantee the loss. Crazy, I know, but it is crazy enough that it just might work!
• Counter-parties Lose: See above
• Managements Lose: It seems that for the most part, most of the upper level bankers who helped bring about the crisis are still working for the same banks. A study found that “92% of the management and directors of the top 17 recipients of TARP funds” are still working for the same banks. Reorg would have caused these people to be fired; perhaps the bankruptcy judges would have clawed back some of the execs ill gotten gains.
• Moral Hazard: Bankers expectations that they can behave recklessly because Uncle Sam will bail them out, is dramatically reduced.
"Safest" by default means it was the safest of options (implying of all other alternatives considered).Well you implied it by defending the moronic Paulson/'Bernanke plans and acting like no other alternative was possible. You are the one aggressively defending exactly what happened as the best of all possible worlds because you still fail to acknowledge there are numerous better ways to structure such a bailout. We picked the worst - the one that benefited the elites the most.
I explicitly mention the same...You are the one aggressively defending exactly what happened as the best of all possible worlds because you still fail to acknowledge there are numerous better ways to structure such a bailout.
The bailouts had two fold objective. Guaranteeing the confidence in markets and preventing widespread chaos and provide incentive to housing markt. It achieved the former but failed in the later.You can do a lot of armchair economizing in hindsight, but the only mistake done was on how the bailout was structured.
The fact that was the only real option available doesn't change the fact that they still went with a citizens first plan and their economy is still much better now than what the neo-classicals thought it would be.As I said, there was no 'citizen first' plan by Iceland. This was the only course available to them.
But there was no evidence that what they did would work and we know it was a failure for all but the richest. There was no data to support the Paulson/Bernanke/Geitner steps either yet they gambled on that plan. That's where you miss the boat here Edgar. They did gamble with the country's economy anyway. They simply made sure the cost and risk would fall on the poorest and working class.I was replying to this directly that there is no evidence that we'd be ssing any of the above benefits if we hadn't bailed out the banks. It was literally uncharted waters and there is no data to support any of the above. No wonder none of the decision makers wanted to jump blindfolded and gamble with country's economy.
Safest for whom? It was the safest plan to protect all the billions in wealth that was redistributed, to protect cnuts like John Paulson (no relation to Hank) and to protect the wealth of the richest 1% sure. That's who the plan was safest for, not for the bottom 80%. It would be safest in the long term to implement a citizen's first plan. If you already acknowledge that they could and should have protected the people first before the guilty corporations they insured then I am not sure why you even keep posting."Safest" by default means it was the safest of options (implying of all other alternatives considered).
Only after a lot of posts. Your initial posts reflected a basic misunderstanding of both the crisis and the bailouts and you still seem to miss the boat on alternatives that were clearly better that economists worth their salt knew about at the time. You put Barry Ritholtz, Nouriel Roubini and Roger Lowenstein together in 2008 and we would have had a much better long term recovery plan than the shite that clueless Paulson and co. regurgitated.I explicitly mention the same...
No need for one, as they were just restoring status quo. What was before still continues. There was no new plan. All they wanted to do was to steady the rocking boat.I will repeat again, there was no existing data to support anything Paulson, Bernanke and the Bush/Obama Administration's did either.
There were no alternatives at that time. Nobody knew how Iceland would turn out to be and there was no reason to beleive that any other option would have better benefits.you still seem to miss the boat on alternatives that were clearly better that economists worth their salt knew about at the time.
This is all just untrue. There were definitely alternatives because I fecking personally discussed them with my econ professors 2007-08.No need for one, as they were just restoring status quo. What was before still continues. There was no new plan. All they wanted to do was to steady the rocking boat.
There were no alternatives at that time. Nobody knew how Iceland would turn out to be and there was no reason to beleive that any other option would have better benefits.
You have the benefit of hindsight now and still have no data if an Icelandic plan would work as well in US or any other alternative would yield better results. Ritholtz himself does not provide any statistical backing and all it was and is ...is just a theory.
Like what? Fo you have anything in US markets that was considered as a viable alternative at that time? A paper or proposal document?There were definitely alternatives because I fecking personally discussed them with my econ professors 2007-08.
I could ask you the same?Like what? Fo you have anything in US markets that was considered as a viable alternative at that time? A paper or proposal document?
Status Quo literally means "keep existing state of affairs" There was no change. No need for new plan, no need for data. Paulson clearly mentions his intention was not to have any changes. What data you need for a process which did not change?I could ask you the same?
What data do you expect to be available on alternatives if you don't expect Paulson et al to produce data supporting their plan c.2008?
Where is your "data" from 07-08 that the Paulson plan is best of all alternatives ?
I'm following this with interest, but as I'm totally unqualified I can't actually add much I'm afraid. I do have a question if that's ok, am I right in remembering that Gordon Brown was an influential advocate for QE and zero interest rates? I don't know if I'm just wrong or maybe read something British bigging up the Brits.I will repeat again, there was no existing data to support anything Paulson, Bernanke and the Bush/Obama Administration's did either.
How the feck is putting the american taxpayer billions in debt the status quo? There was a drastic change and a shit plan that basically everyone was utterly disgusted byStatus Quo literally means "keep existing state of affairs" There was no change. No need for new plan, no need for data. Paulson clearly mentions his intention was not to have any changes. What data you need for a process which did not change?
You've been the one to mention alternates and other better plans...all with nothing to back them up.
He's gonna say that taxpayers made a profit on the bailout: https://money.usnews.com/investing/...risis-bailouts-have-earned-taxpayers-billionsHow the feck is putting the american taxpayer billions in debt the status quo? There was a drastic change and a shit plan that basically everyone was utterly disgusted by
Again, I ask...what were the alternatives?How the feck is putting the american taxpayer billions in debt the status quo? There was a drastic change and a shit plan that basically everyone was utterly disgusted by
Sorry, im just pointing out what a crock of shit that the bailout was maintaining the status quo is.Again, I ask...what were the alternatives?
Easy to be a armchair citic with benefit of hindsight, eh?Sorry, im just pointing out what a crock of shit that the bailout was maintaining the status quo is.
The status quo crashed the fecking the economy and your argument seems to be "lets keep the status quo because Paulson said so we dont need any evidence"?Status Quo literally means "keep existing state of affairs" There was no change. No need for new plan, no need for data. Paulson clearly mentions his intention was not to have any changes. What data you need for a process which did not change?
You've been the one to mention alternates and other better plans...all with nothing to back them up.
Due to crash, the market had short term liquidity crisis and people were losing faith in banks. This would typically lead to mass withdrawals which no bank (even those who do no need TARP) couldn't handle. So the govt had to step in and guarantee liquidity and ensure no other bank defaults.The status quo crashed the fecking the economy and your argument seems to be "lets keep the status quo because Paulson said so we dont need any evidence"?
I don't know what to make of this post because it literally doesn't make any sense. You should probably rephrase what you're trying to say