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Comment by haberman | Hacker News Reader

Mortgages (or any loan really) implies risk. This is part of why the loan is profitable: repayment isn't guaranteed. It is the bank's job to protect itself from risk. That is why it takes collateral and assesses that collateral. It's why the bank requires a down payment, especially if the borrower is on the edge of what they can afford. If the buyer defaults, the bank takes the collateral back and it's their job to make sure they are in an ok place afterwards.

So yeah, when the entire industry comes to the government and says "unless you bail us out right now our entire industry will collapse, but you're definitely going to save us because we're too big to fail," then yes, it means it's their fault. The public may have been complicit, but it's not the public's job to keep the financial industry healthy when the profits from that industry are kept privately.

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>when the entire industry comes to the government and says "unless you bail us out right now our entire industry will collapse

That's an interesting interpretation of the events. In fact, there were institutions that were coerced by the government to participate in the bailout. Much of the derivatives betting was zero-sum, and done amongst the banks. The winners of those bets would have been more than happy to watch their competitors fail (fire sale!).

Institutions had to be coerced into letting the government buy their toxic assets through TARP? I would love to see a reference on that.

Claim by Jamie Dimon that they didn't want TARP funds but were pressured to take it: http://cnsnews.com/news/article/jpmorgan-chase-ceo-bank-took...

So that speaks very highly of JPMorgan, and none of my criticism then applies to them. It's all the banks that were going to fail without TARP that I am criticizing.

> June 11, 2009 | SINCE the economy hit an iceberg in October, America's biggest banks have felt a bit like shipwreck survivors: required to wear lifebelts provided by the government, despite complaints from some that they could have kept afloat on their own.

http://www.economist.com/node/13832261

> April 16, 2009 | THE WORST nightmare of many bankers, natural capitalists, is being under the direct control of the government. So it's no surprise that American banks want to throw off the yoke of government meddling and pay back any accepted TARP money as soon as possible. Predictably, Goldman Sachs is leading the charge.

http://www.economist.com/blogs/freeexchange/2009/04/i_dont_w...

> So yeah, when the entire industry comes to the government and says "unless you bail us out right now our entire industry will collapse, but you're definitely going to save us because we're too big to fail," then yes, it means it's their fault. The public may have been complicit, but it's not the public's job to keep the financial industry healthy when the profits from that industry are kept privately.

The point is that complicity provides the avenue to allow people to tell themselves a story of how the banks weren't the largest part of the problem.

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