“The crypto bankruptcies are just an appetizer. Who on Wall Street will be the main course?”
The federal government under President George W. Bush in 2008 had a decision to make regarding the “too big to fail” Wall Street investment banks. The government could have allowed them to go into bankruptcy restructuring (like the airline industry went through in the 1990’s and early 2000’s), paid off the depositors of any liquidated banks up to the FDIC limits, and let the bondholders, stockholders, and executives incur the losses. Second step reinstall the Depression era Glass Steagall law which separated investment banking from retail banking and kept investment bankers from speculating with retail accounts. Then begin enforcing anti-trust laws to keep the big New York banks from buying up regional banks and thereby becoming “too big to fail” in the future. If the investors, bondholders, and executives had absorbed the financial loss, instead of the taxpayers, future investors in banking and investment firm stocks and bonds would have been extremely demanding that the banks be financially sound. Government backstopping of businesses is an incentive for taking on risk, not an incentive to manage assets conservatively.
The second option was to bail out the big banks. This is the option President Bush, his Goldman Sachs treasury secretary, and the Federal Reserve chose. Within a year the bailed out banks were paying multimillion dollar bonuses to executives and easing back into the activities that resulted in failure. In addition, Wall Street financiers gave heavily to Democrat candidates in the 2008 election to ensure government had their backs.
It is beginning to appear that our failure to allow capitalism to work and sweep away the bloated insolvent firms in 2008, will result in another financial crisis caused by greed, excessive risk taking, and payoffs to politicians. Both political parties are completely complicit in the coming travesty.
It is beginning to appear that our failure to allow capitalism to work and sweep away the bloated insolvent firms in 2008, will result in another financial crisis caused by greed, excessive risk taking, and payoffs to politicians. Both political parties are completely complicit in the coming travesty.
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I like your first option, but ever since the deflation of the 1920’s & 1930’s, where you had multi year deflation the PTB have decided to error on the inflationary side.
There will be a high price to pay for the bailout and cheap money policies of the last 14 years.
Great post, Soul of the South.
Well done.
They shoveled out the short-term loans.
Within a year the bailed out banks were paying multimillion dollar bonuses to executives and easing back into the activities that resulted in failure.
Not only that, they also repaid all those loans. And made tens of billions in profits for the US Treasury.