Just one example
AIG FP were insuring the debt obligations of various counterparties and they just could not make the payout when actually called out. This led to rating downgrade of entire AIG group which in turn meant the Group had liquidity crisis and had to make huge margin adjustments, which would have bankrupted them. If the Govt did not step in, those losses would just cascade out and had to land somewhere else. Though the insurers are protected, the investors are not and these include variety of hedge and pension funds. Plus nobody really knows what the failure of a trillion dollar company would have on markets that were already jittery. And again nobody wanted to find out.
We didn't maintain the status quo. It was a shit plan at the time too, no benefit of hindsight needed.
It was the only plan at that time. Alternative was uncharted...I repeat myself.
So a shit plan that was blatantly going to fail is better than an untested plan (as long as we pretend iceland doesn't exist) that might have worked out better. Gotcha.
subprime mortgages forgiven, shareholders pay for the losses through sale of the banks to the government for pennies on the dollar, the people at the top of the companies who ran the scam go to prison forever
The equity of the firms would be negative in that case.
that's fine, they would have been backed by the worlds major governments who can afford to take a loss, most of the banks which failed were based in the richest parts of the world which could most afford to take the loss
For an over/under Eboue maximum wage, I'd have guessed significantly under half a million dollars to be honest.
I'm saying you're overpaying by giving cents of the dollar, and then writing off a massive chunk of the assets.
Having the entire banking system directly under the political system is.... fun. We tried a lot of that in Brazil, doesn't quite work out like I think you're envisioning. Private banks are bad enough at assessing risk, public ones tend to be even worse.
I'm one of the people who wants the housing market cashed to be artificially crashed and better distributed so I'd forgive them too
I'll take my chances having some accountability as opposed to none.
We'll be having the same conversation 10 years after the next crash.Surprised there's still people defending the method of bailouts in 2019. I mean sure, in september 2008 it was more important to keep the system running than to punish the greedy feckers who fecked it up (and that IS what caused it, greedy feckers selling bad loans as good loans), but that's no reason not to do anything after the fact.
But nothing was done... the greedy feckers done the same thing with car/consumer loans since then and no politician cares. "Keep a bit more cash, will ya?"
I haven't studied the UK specifics to comment here. I read articles about the UK but most of my research and papers were focused on the US
I'm defending up to the highlighted point, and beyond that against extreme measures that I don't think stand up in the real world (like forgiving all the mortgages, or flash nationalizing the entire banking system globally).Surprised there's still people defending the method of bailouts in 2019. I mean sure, in september 2008 it was more important to keep the system running than to punish the greedy feckers who fecked it up (and that IS what caused it, greedy feckers selling bad loans as good loans), but that's no reason not to do anything after the fact.
But nothing was done... the greedy feckers done the same thing with car/consumer loans since then and no politician cares. "Keep a bit more cash, will ya?"
Thanks, that's kind of answered my question anyway, Brown couldn't have been that influential in the States or you would have known.
Tax and build is the answer, but no one wants to be taxed, and no one wants new housing estates near them, so those without houses have to lump it I'm afraid. When pushed they mumble something about brownfield sites, meaning anywhere that's not near them.
So this is your argument defending every single bailout? That the taxpayers simply had to guarantee 100% of every single one of these companies obligations or else? (Citi, Bank of America, Wamu, Wachovia, Countrywide, Lehman, Merrill, Morgan). Do you apply that same logic to the bailouts of the auto industry too? Is this line your defense of the hundreds of billions of free taxpayer money that was handed to the big corporations? We had to give these entities hundreds of billions of free money - hence why I called it extortion at the beginning.
Honestly i dont know what the solution was. The option we took just ... wasn't it. I cant accept that at all. Propping up the banks didn't steady the economy, thousands of business went under, thousands lost their homes. The only thing the extreme cost bought us was the continued existence of failed businesses run by overpaid, incompetent jackasses.
That's part of the solution but it needs more. There's large parts of the UK where the land will cost you more than the bricks and builders, for example, and the houses in those cities would still be very expensive. There's also a distribution problem in housing, with fewer and fewer people owning more and more houses. If we have a major national building program we also have to make sure that the small number of landlords don't just buy them all and keep us over the barrel.
I agree that it missed a next step. The banks are a bit more regulated and a bit less levered, but that's about it. They're well capable of blowing up again.
Yes I get that, if it's a danger, and with increased supply it may not be, there are options tax and regulation-wise.
Oh ffs, it was the only plan being discussed because thats all they ever wanted to discuss. Paulson instantly got on the phone with his boys at Goldman and Jamie Dimon and that clique basically formulated the plan and never even considered alternatives from any of the economists outside their coterie. As with the Democrats and their "stakeholders at the table" assumptions for health care they already went in knowing what results they wanted for themselves. Dozens of groups of different economists were talking about plenty of alternatives but they got locked out of any elite decision making early on because Dimon and the Goldman boys were Paulson's go-to on speed dial (documented in many books like House of Cards and Street Fighters and Colossal Failure of Common Sense).
The ripple effect of a AIG or one of the big banks failing would be far greater than any thing before. So, yeah it may be a shit call...but it was the right one. Alternatively more than 4 million taxpayers would have suffered...considerably more. It was lesser of two evils, to put it bluntly.
Sorry, I don't have a proper reply to conspiracy theories.
That's all you have espoused in this thread.
https://www.barrons.com/articles/hank-paulson-looks-backat-the-turmoil-of-2008-1536759000That's all you have espoused in this thread.
Your only argument in this thread has been 'even though the status quo crashed the economy and was clearly broken, we had to do everything we could to preserve that status quo' without any evidence, without any data and without any actual logic.
Yes Edgar these three are conspiracy theorists
Two of the most respected Wall Street journalists and Lehman Brothers' former VP giving first hand accounts. You just keep repeating the same cliche bullshit with nothing backing you up.
https://www.nytimes.com/by/kate-kelly
https://www.vanityfair.com/contributor/william-d-cohan
http://www.lawrencegmcdonald.com/colossal-failure/
'lesser of two evils" now you are back on the same false dichotomy I debunked earlier. As if the only choice was between the exact Paulson plan and "doing nothing"
Also wtf are you talking about as if only the 4 million who lost their homes are the only ones who suffered?!? People lost their jobs, their businesses, had their hours cut, had wages cut, had benefits cut all the while all the guilty partners kept their ill gotten wealth, big finance got billions of free money
FFS Pillow you sound so disconnected and isolated from reality up there in your Wall Street Ivory Tower.
There were 3 options available to Hank:
Mate all you are doing is repeating the fallacious and invalid arguments that were already debunked in my first posts about setting up a false dichotomy. Again, I really question your judgment here in defaulting to the guy who was so clueless he missed the entire crisis as it was happening and then had to lean on Dimon and the Goldman crew (again documented by respectable journalists and a Lehman VP ffs). Your (1) is just a fallacy because a) it was impossible and undesirable to maintain the status quo and b) TARP WAS an uncharted solution.
All you do is be a critic without offering viable alternate. Quite useless in real life.
Do you even read posts or just repeat catch phrases and buzz words without critical thinking?
Sorry, if I'm harsh...but that naive and shows lack of understanding how macro financial market work. There was no point guaranteeing mortgages while public loses faith in banks. A bank failure would be more severe and broader than just mortgage market. Per latest count the total mortgage market value was at $10 trillion...and what was your proposal....Govt should arrange to repay/write off all mortgages in one broad stroke? Was there any means to at least differentiate which mortgages were in distress due to the crisis and which were not? Very idealistic..but sadly not practical at all.
Again, you have no idea on what the impact of letting a BofA or AIG fail. Plenty of AIG investors were pension fund holders for instance. The downstream impact of letting them fail is obvious to anyone who has worked in financial sector industry. Not just Paulson, it was a decision that was replicated across multiple countries. If AIG failed today, I doubt there would be a bailout as the market is stable and the impact can be relatively contained. The cascade effect is quite low. Not in 2008.
Any run on the banking system is a risk to the entire economy, regardless of what assets on the balance sheets are taking the losses. Because if your banks fail then the entire monetary system halts until it can be sorted. Meanwhile transactions aren't processed, be it payroll, b2b transactions, your ATM machine, etc. Every banking crisis of any nature is always initially addressed by the central bank + govt insuring that the banks in question will not go out of business suddenly (be supported, bought-out, etc), regardless if the situation arises from internal or external causes.
