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Comment by downandout | Hacker News Reader

Taxpayers not only recovered everything from the 2008 bailouts, they actually earned a $15.3 billion profit. How is that “socializing their biggest failures”?

From [1]:

Early estimates for the total cost of the bailout to the government were as much as $700 billion, however TARP recovered funds totalling $441.7 billion from $426.4 billion invested, earning a $15.3 billion profit or an annualized rate of return of 0.6%...

[1] https://en.m.wikipedia.org/wiki/Emergency_Economic_Stabiliza...

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You left off an extremely relevant detail from your quote: "... annualized rate of return of 0.6% and perhaps a loss when adjusted for inflation"

“Perhaps” isn’t a data point - it’s speculation, and is thus irrelevant. The money was recovered at a $15.3 billion profit. If they had included a number and a reference to the data backing up their guess that “perhaps” it might have been a tiny inflation-adjusted loss, I would have included it.

I’m not sure what your point in bringing it up is either. The point is that the bailouts were fully recovered, and that is undisputed. HN loves its pedantry, but there is little value to this particular incarnation of it.

If interest payments were the only thing getting bailed out people wouldn't be angry over it.

Well, they shouldn’t be angry at all, because they got a $15 billion profit. People are a bit too tough to please if that makes them angry, especially in light of the fact that we will be paying for the most recent stimulus packages for generations, and they seem to have public support.

It’s easy to make a profit when everyone is strapped for cash and you have an infinite supply

There's no such thing as infinite money. Cash just symbolizes value its not actually "value", and you can't make infinite value by just printing infinite cash.

I’m not the person you should be explaining that to

You seem to think that the government's control of the money supply means its easy for them to make a profit.

No I think that it's easy for people that got the bailout to make a profit while being flush with cash in a crisis which they themselves caused, with no repercussions. Printing that money devalues everyone else's money, so it's basically a transfer of wealth from everyone to wall street.

The banks don't have to manufacture the product. They just sell it. The easy money is the profit margin on the lending activity because the profit margin is usually constant, regardless of the state of the economy.

I'm not saying banks are evil but they do have it easy because they are core infrastructure that people don't want to live without.

> It’s easy to make a profit when everyone is strapped for cash and you have an infinite supply

I’d expand this... It’s easy to make a profit when everyone is strapped for cash.

Perhaps, but the point was that these banks in no way “socialized their biggest failures”.

>>Taxpayers not only recouped everything from the 2008 bailouts, they actually earned a $15.3 billion profit. How is that “socializing their biggest failures”?

Taxpayers should have behaved like hedge funds behave with one another...merciless. Want cash cause no one else loans to you? Sure, hand 95% of the business. The difference between what I said and $15.3 Billion is the gift.

The government is not a hedge fund. It has no expertise in running businesses. Had they done what your are suggesting, the markets wouldn’t have reacted the way they did, the companies would have gone bankrupt under government mismanagement, the economy would have continued to crater, and not $1 of the money would have been recovered.

It turns out that the architects of this bailout were very smart about the way they did it. Also, relative to the recent stimulus packages that have no hope of ever being recovered, the numbers from 2008 are quaint and the conditions under which it was given were extremely fiscally responsible.

>>Had they done what your are suggesting, the markets wouldn’t have reacted the way they did, the companies would have gone bankrupt under government mismanagement, the economy would have continued to crater, and not $1 of the money would have been recovered.

Nah. Keep the management, they run the business not owners. In fact give them raises and bonuses. It's not like managers had other employment options.

But either way, they did get a lifesaving bailout, regardless of the merits or whether US got their money back

they did get a lifesaving bailout, regardless of the merits or whether US got their money back

They did, and given the systemic importance of the companies that received this money, that was a gift not only to the companies, but to the entire economy. We wouldn’t have an economy today had they not done this. Today we are capable of giving away trillions with no hope of recovery in part because of what was done in 2008 - and it was done at no cost to taxpayers.

The government isn't supposed to run the company. It's supposed to get an ownership stake to compensate for the risk it takes on. The bank would just issue additional non voting shares and sell those to the government as a punishment for the share holders of the banks and teach them a lesson to not put their money into mismanaged companies.

They wouldn’t have taken non-voting shares if this were the stance they were taking. When the government owns a controlling interest in a private company, investors will shy away from it. Even if the government doesn’t run the day-to-day operations, they can replace management at-will with people who will obey commands based upon political interests of the ruling party. That is an unacceptable risk to many investors. Ultimately, if they own it, they run it.

The point is that the outcome would not have been the same, because investors would not have treated the companies the same.

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