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Comment by letitgo12345 | Hacker News Reader

The TARP bailout was not money just handed out to banks. It was loans to banking and other industries which was repaid in full overall. And in fact it was the auto industry which failed to repay the loan, not the banking industry.

I'm not a fan of the financial sector but let's keep the facts straight here

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No. They were hand outs. Only some banks got them. PNC got $5 billion from TARP. They then bought National City Bank, a regional bank in Ohio. National City was not allowed to even apply for TARP. PNC bought NC with that $5 billion, then got a tax break for $5 billion for "saving" them.

PNC bought National City for free, using tax payers money. TARP was not a loan. It backed every bank debt 100% (when it should have been pennies on the dollar) and allowed the strong banks to kill all the weaker ones, literally for free.

Had TARP not gone though, the banks would have had to sell mortgages back to debtors at a fraction of the price. Instead, they continued to collect loans on debtors, feed the rich and destroy the savings of the middle class.

It sounds like the tax break was the handout, not the TARP loan.

It was backstopping shitty loans with the full faith & credit of the gov't. Note that the person who received the shitty loan still got foreclosed on and lost their equity. The persons responsible, who made the loan, don't have to take a loss.

I think the economic phrase that you are referring to is "moral hazard".

https://en.wikipedia.org/wiki/Moral_hazard

It's one way that an economy can break down...

What sort of belief should I start from to be able to decide that people taking a loan they can't afford bear no responsibility? I imagine it's the same sort of thinking that leads to calling a property they never actually paid for theirs but I am not sure and when I am not sure, I ask.

They both bear responsibility, but only one party got the bailout.

I hear what you're saying, but bankruptcy is most certainly a bailout relative to debtors prison.

That's an interesting perspective, but the U.S.A. does not have debtors' prison. Only bad loans that are not repaid.

the U.S.A. does not have debtors' prison

While true in theory, this may not be true in practice. There are several loopholes, one main one being that failure to pay fees and penalties assessed by the justice system itself can be a criminal offense. In some states a significant percentage (as high as 20%) of current prisoners are being held for failing to pay these LFO's (Legal Financial Obligations).

Here are a couple ACLU reports about the practice:

  In for a Penny: 
  The Rise of America’s New Debtors’ Prisons

https://www.aclu.org/files/assets/InForAPenny_web.pdf

  Modern Day Debtors Prisons: 
  The Ways Court-Imposed Debts Punish
  People for Being Poor

https://aclu-wa.org/sites/default/files/attachments/Modern%2...

> failure to pay fees and penalties assessed by the justice system itself can be a criminal offense

Which doesn't have much of anything to do with the real estate market, right?

Correct. I hoped from context that it was clear that I was responding only to the line that I quoted (which said that the US "does not have debtors' prison") and not to the main thrust of the argument.

Yeah. Historically society has sent people to prison for failing to pay. Today we allow for bankruptcy, which is relatively better.

Conversely, why should a bank should be protected from their stupid decision to make that loan? That's supposed to be why loans charge interest. It's to cover the risk of default. But they didn't even consider what would happen.

Without help from the government, those loans would have never happened at those rates.

If you don't like FAFSA loans, you are perfectly willing to go to any bank (or maybe a rich uncle) and get another loan (or convince your rich uncle to bankroll you). But for the vast majority of people, FAFSA is the only way to pay for college.

And taking out 8% or 9%+ loans from NON-FAFSA institutions is a lot worse than taking a 6% to 7% FAFSA loan. I think funding the loans and keeping interest rates lower is a good thing.

It is an artificial government subsidy, used to fund "non-profit" real estate development.

And what of quantative easing where trillions of assets of banks (including junk mortgage backed securities) were purchased by the Fed, relieving banks of the full impact of their actions?

I was going to call you out on conflating TARP with QE, which bought Treasury bonds, but I now see that was just QE1. QE2 and 3 bought mortgage backed securities and bad bank debt. Disgusting.

How about gov do quantitative easing for these student loans. Basically provide contracts and various incentives for companies that are employing these students who have loans. Also to various vendors like house owners etc who provide service to these students. This would create a negative impact on students who did not took loans or got good jobs and paid up in time etc. But that's how largely it was done for QE also.

You can't inject wealth into the system at the demand side like that! The rabble will spend it all on natty ice and chalupas! Gotta give it to the job creators!

"QE for the people" is essentially just Basic Income.

Sort of:

Just this morning Ray Dalio commented in an interview on problems with Fed controls via interest rates or injecting money via QE, vs times when the economy might respond better to 'helicopter money' or injecting money directly to the people.

http://www.marketplace.org/2016/04/06/world/economy-debt-cyc...

I'm reading further than the Dalio comments, but if one were to implement Basic income with some ratio of "helicopter" injection selectable by the Fed, it would give the Fed another control pedal to better manage the economy. In particular, when investment level injection is just circulating among the financial circles and not making it down to the main street economy which cycles money with buying and selling of more real goods.

You mean, they paid it back by having the USG buy all their shitty home loans to get them off the books?

I'm not a fan of the financial sector but let's keep the facts straight here

If banks can 'pay back' their TARP loans with bad debts, students ought to be able to 'pay back' their student loans with promise of future earnings excess of minimum wage, that was supposed to be enabled by taking on a degree.

It anyway isn't the case that TARP and QE are aimed just at the financial sector. They are aimed at preserving the existing economic order. If insurance companies start defaulting, things get exciting.

Oh please... paying back with little to no interest means it was a government handout.

The banks got rich using that money (giving loans with that money at much higher interest of what they were paying the government, it was a bonanza for them), the taxpayers money at the expense of the middle class.

So yes, let's keep the facts straight here.

All the banks and companies received loans, not handouts. The govmnt. made a profit on all of it, actually.

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