>Banks fuck up by given loans to people who could never realistically pay it back
>get bailed out by the Fed which basically created money out of thin air to swap worthless bank assets effectively giving banks a clean slate
>no one goes to jail
>a normal business fucks up
>forced to go bankrupt, lay off thousands of jobs, CEO goes to jail for manipulating earnings, company is vilified by the media
Why is this allowed?
In Canada we didn't have a subprime crisis so maybe I'm wrong on this, but IIRC the US government spent decades pushing this idea that every American should own a home, and there was a lot of government pressure on banks to make those loans in the first place. Blame government.
Imagine you had loads of money saved in the bank and then it was suddenly all gone.
Imagine that happened to everyone.
It would be much worse than any other scenario. Any other alternative would be better than letting them all fail.
>big banks fail
>ATMs stop giving out money
>everyday americans have no money left in pension funds, checking accounts, savings accounts
>commercial paper markets are absolutely fucked and will remain fucked for at least the next five years
>nobody able to get loans because there is so little capital left in the market and even if there were sufficient capital, capital hoarding is in full force
>industrial orders go down and aggregate demand disappears
>mass layoffs
>mass societal unrest
are you retarded user
the banks paid back the bailout loans with interest, it turned a profit for the feds
>Government makes the "community reinvestmnet act."
>forces banks to give out loans to blacks and low income people
> banks invent a way push the risk off to others
> governmnet acts like it had nothing to do with it
everyone was in on it.
They should have let them fail and invoked FDIC
Banks need a banking license which is extremely hard to get.
That's why
This. They basically looked at the number of people who would be pissed off at banks being bailed out versus the number of people who would be pissed off at their bank no longer existing, possibly along with a big chunk of their money and went for the first option.
It was a mistake though because in the long run it would have been better for the average guy if the banks had taken the loss and the debt had been liquidated.
That's a myth. Even the Republican response to the FCIC acknowledged that the CRA had little to do with the crash. Less than 5% of subprime loans were subject to those rules.
By the way, Fannie and Freddie also had very little exposure to subprime loans. You have to understand that these are incredibly corrupt organizations that made their own standards and mailed them to congress to approve. Freddie ran razor thin margins and plundered their capital reserves to pay executives, so the slightest market downturn killed them.
The vast majority of subprime loans had nothing to do with government incentives, because they were made to previous homeowners who were upgrading to overpriced mcmansions. Intuitively, it should be obvious that a guy defaulting on his $100,000 loan and getting his resellable house foreclosed upon is much less impactful than a guy defaulting on a $400,000 loan on a house that's worth half of that.
It not just about people being "pissed off." It goes so much further than that.
It would be complete systemic collapse. Not even anarchists would enjoy the world they would find themselves in.
Then why not let the banks fail and have the fed give money to the people owed it?
You're not thinking things through clearly, closer to their end results.
Our whole systems are built on confidence. It is more fragile than you think.
I mean lets entertain that idea just for a second about letting the banks fail. What then? We would just have to build them again. So what would even be the point. It would just be more effort and aggravation than bailing them out. Not to mention the actual real risks in doing that which go so much further than just a failing bank. the consequences would be wide ranging, much further than your seem to be able to critically think about.
>We would just have to build them again. So what would even be the point.
Not saying i disagree with the bailout, but the point would be a message to the new CEO's that unsustainable lending practices wont be tolerated or bailed out. This would eliminate moral hazard (ie make tons of money with no risk, because the risk is offloaded onto the US Govt at no expense of our own. If we dont fail, we win. If we fail, we get bailed out and win anyway).
They got the message and have addressed the most of the biggest problems and reasons.
And either way, in either scenario, they would be bailed out again, and again and again. Because the alternative would be worse.
Don't worry about it. I bet you barely felt a thing. And that was the best thing that could have come of of near total disaster.
>They got the message and have addressed the most of the biggest problems and reasons.
I truly have my doubts. There is no downside to having outlandish capital leverage if your a big bank. The profits you can make when they work out (and they often work out too) are enourmous, but if it doesn't work out, the CEO's, the banks, stand little to lose. There is a problem with incentives, and im not sure how to mitigate this.
Perhaps if one catastrophe were too occur, where they were not bailed out, yes it would be terrible, but in the long run, things would recover, and we wont have the same moral hazard that we still have today.
Nothing has changed today. The same conditions exist now that existed before 2008.
Because they didn't do anything illegal. It's not illegal to buy swaps or issue bad loans or sell shitty securities before Dodd Frank.
I had a crush BAD on hermione granger when I was a prepubescent boy.
and goddamn she has just kept right up hasn't she? only got BETTER for fucks sake
>I truly have my doubts.
That's right. Not only does history often repeat itself but there will be new catastrophic events in the future that no one has foreseen yet. Even if you let them fail now, they can and probably will still fail again. Either for the same reasons or new ones.
This system isn't perfect, no one is suggesting it is but unless we can come up with a better one, we just have to mitigate and smooth over these events as best we can.
Just do your best to protect yourself from these events and go even further to figure out ways to profit off these situations like any true Veeky Forumsnessman would.
the better alternative
>
"Thats a myth"
t. ninja loans office
>Why is this allowed?
Its how the system works mate, This sort of crap is integral to its workings.
FDIC has 99 years to pay you back from the date of invocation. Good luck with that.
kek your lack of knowledge is apparent
The result now is that banks are much more conservative with giving out loans, especially to self employed.
Really fucked my shit up to be quite honest.
My first loan was €80k "self certified". I didn't even have to prove my income or provide collateral.
That option is gone now.
a certain amount of money is allowed to be created from thin air, then youd get inflation.
banks failed all the time until the fdic started insuring deposits. muh gibs is ironically what holds all this together
She's got worse since age 14 idiot
I don't think the debt disappears. Someone needs to get paid or write it off. The IRS isn't going to just let that chunk of income disappear.
>Banks fucked because stupid niggers like you don't pay your bills en masse
This is what liberals actually believe
Protest on the Highway some more see how that goes speedbump
Bagehot said any assistance given to a bad bank today prevents the emergence of a good bank tomorrow or something like that...
Even if the government forced them to loan to the poor more, why did investments banks, who didn't originate the mortgages, buy so many of them to the point where some of them had literally half of their assets in the form of MBS?
Why were insurance companies offering credit default swaps on nigger mortgages if they were widely despised government-mandates?
The truth is that the government had nothing to do with it. FHA and government entity mortgages had a lower default rate than those offered by private lenders.