Does it?
It cost the taxpayers nothing (in fact it made us money), it destroyed 4 of the 5 largest investment banks in the US, and it sent over 200 bankers, brokers, and auditors to jail.
What part of that are people mad about, and why?
A lot of people I’ve talked to about it weren’t even adults when the bailout happened. They weren’t watching the news and didn’t care at the time. They only know it through pop culture and from fiery speeches from politicians and influencers.
The idea of a bailout has become synonymous with the government handing hard-earned tax dollars over to banks, no strings attached. The facts don’t really matter.
https://www.housingwire.com/articles/38536-failed-bank-ceo-g... https://www.justice.gov/usao-md/pr/former-president-and-ceo-...
https://oig.federalreserve.gov/releases/news-bekkedam-senten...
https://www.washingtonpost.com/news/business/wp/2015/09/02/b...
https://www.housingwire.com/articles/38536-failed-bank-ceo-g...
https://www.justice.gov/usao-md/pr/former-president-and-ceo-...
https://oig.federalreserve.gov/releases/news-bekkedam-senten...
https://www.washingtonpost.com/news/business/wp/2015/09/02/b...
Again, literally just the first half of the first page of Google results. People can do this on their own, too, if they want to learn more about it
The fact remains that nobody who caused the crisis day saw a day in prison, and the banks who did were bailed out when it easily could have been the soon-to-be-homeless citizens instead.
Though it sounds like they're mainly talking about bankers jailed for fraud related to the TARP loans themselves, as opposed to the mortgage fraud that precipitated the crisis.
https://archives.fbi.gov/archives/atlanta/press-releases/201...
> > Literally dozens of CEOs went to jail, which is again why I think this may be the biggest ball-drop of the media this century
The GP's remark is centered around the *sentiment* that none of the C-suite / execs in the Big Banks (Merrill, Goldman, BoA, Citi) were jailed for their involvement / excessive speculation in the 2008 crisis.
The keywords there being "Big Banks": If it's a national household name, OR if their positions are coveted by finance employees, it's a Big Bank. Otherwise, it's not a Big Bank.
> > > Your Google skills may need some work because this is the first result for "bank CEO jailed by TARP":
1) This is a goalpost shift from "bank CEOs jailed for causing / excessively speculating up to the 2008 crisis".
2) TARP was established as a result of the crisis (i.e. AFTER it happened), and therefore cannot be used to mark execs that were jailed for their involvement / excessive speculation in the 2008 crisis.
3) "TARP defraudment" is a different matter, and not "Causing the 2008 crisis" or "excessive speculation"
> > > https://archives.fbi.gov/archives/atlanta/press-releases/201...
The case cited only tangentially involves TARP, when the bulk of the case was about the President of FirstCity Bank & his associates defrauding the bank with loans that *they themselves had involvement in*.
In terms of public sentiment, for the conviction to have happened, it has to happen to the Big Banks, and not anyone else. If it didn't happen to the Big Banks, then narrative-wise it didn't happen at all.
This comment puts it well. [0]
Jailing people is for crimes committed, not for punishing people you dislike.
The fix was for the government to pick some winners, coercively lend them money and force them to buy the failing banks.
Now we have fewer, bigger banks. People who were conservative with money, saved instead of over-leveraging, did not get to buy assets cheaply, because the government propped up asset prices with unlimited, cheap money.
And TARP did eventually produce weak positive returns. So I'm glad they didn't lose money, but I'm not happy I was prevented from buying fire sale assets. I'm also not happy residential housing prices are 2x what they were in 2010 (and still well over 1.5x the peak of the bubble).
Perhaps worth noting that Ben Bernanke, who was the chair of the Fed at the time, was/is one of the most top experts on Great Depression (it's the work he later won the Nobel Prize for). So as bad as the GFC was, Bernanke thought it could get really bad and pushed for measures that he probably thought would prevent another 1930s scenario.
People who want a society-wide crisis so they can profit off it are far more morally reprehensible than people who said "we'll loosen the mortgage criteria a bit so people can buy houses, houses always go up in value right?"
This is another common misconception about bailouts: That if the government hadn’t stepped in, individuals would have been better somehow or been able to take advantage of a collapsing economy for personal gain.
You wouldn’t be buying fire sale assets and getting great personal returns. That would have gone to corporations, family offices, and people in higher tax brackets.
If you want to see why people are mad look at what is actually causing them pain. For young people it’s mostly housing costs.
Many blame the bailouts. That may be wrong, but it’s a visible scapegoat.
Think of all the small businesses that would love to take particular risks if they knew they wouldn’t have to suffer the normal consequences associated with failure…
edit: it's unfortunate that you can't bring up any actual evidence to support your assertion
https://hartfordbusiness.com/article/fed-myth-busters-35-ban...
And, again, I'll remind you that until five minutes ago you thought the number was zero, and yet you're not happy to learn you're wrong. Puzzling.
Do you have any names?
The article you posted is about a banker convicted in 2013 for fraud committed in 2011 that has nothing to do with contributing to the 2008 crisis. No CEOs were jailed for that.
Take your anger somewhere else because the truth is that it’s still zero, just like it was 5 minutes ago and 18 years ago. What would you possibly have to gain from lying about stuff like this?
> Goldsmith Romero said it’s wrong to say that bankers now in prison only came from small banks. She said that that some banks had assets of as much as $10 billion and were very big players in the states where they were based. But she said it is true that top executives at the so-called “too big to fail” banks have avoided any criminal charges, even as their banks paid tens of billions of dollars in fines to settle charges of wrong doing leading up to the financial crisis.
> “I certainly understand the frustration of the people who want to see accountability for those who brought on the financial crisis,” she told CNNMoney. But she said even when the big banks admitted to wrong doing, investigators were not able to prove criminal action by the banks’ executives.
Five minutes ago I was unhappy there were no apples, and you're showing me a stack of oranges and then acting like it's irrational for me to not consider all fruit equivalent. I imagine you'd claim this is goalpost moving, but when you're apparently getting into conversations about this often enough to have formed your own narrative about so many people being irrational, it's worth considering that maybe it's more likely that you as an individual have been misunderstanding what everyone else has been saying rather than large swaths of people all suffering from a massive delusion that you alone have managed to see the real truth about.
https://www.justice.gov/usao-md/pr/former-president-and-ceo-...
https://oig.federalreserve.gov/releases/news-bekkedam-senten...
That's literally just from the first page of Google results, which you are also free to use if you want to learn more about this.
And btw "it's just TARP fraud" is an idiotic thing to say: the fraud was in misrepresenting the banks' positions prior to the crash during the TARP audit.
People want CEOs to go to jail for knowingly playing a role in causing the crash. Misrepresenting banks' positions afterwards isn't it.
I know there were some really large settlements in 2012 and onward, but for everyone I know who lost their business or their home or their investments, I don't know anyone who received any of this settlement money.
Some people might consider it idiotic to post 3 broken links to articles they clearly haven’t read; others would simply consider it obnoxious.
> the fraud was in misrepresenting the banks' positions prior to the crash during the TARP audit.
TARP fraud wasn’t what caused the crisis. The popular narrative is that the credit rating agencies failed to do due diligence because they were making a lot of money handing out high ratings on junk CDOs. So far as I know, no one involved in this went to jail. People were angry about the events that led up to the crisis not being punished; most probably didn’t even know about the fraud that went on with the program set up to bail out the banks after the fact.
And caused a global recession along the way. The loan repayment interest didn't (and couldn't possibly) cover even a fraction of the backlash, which includes lives destroyed world-wide.
Externalities?
They're talking about the bailout. I think the bailout came after the cause of the recession.
Pull the other one, it has bells on it. If the government is involved in a financial transaction it is because nobody in the private sphere with money wants to be involved. That means either the return wasn't commensurate to the risk or there was dodgy accounting going on that nobody would actually thought represented a reasonable real return. If there was actually a prospect of making a reasonable return, money would have been found. Even the creditors might have been willing to make deals.
I bet the average taxpayer would much rather have the money given to them in their capacity as an individual and would have profited off it more than the hypothetical return the US government may claim it made.
> What part of that are people mad about, and why?
The gross unfairness of it all. I mean, it is bad enough that the failures in charge of the banking system got bailed out despite being incompetent at their jobs, but the average person had to guarantee them their high status role in society? It is a sick joke.
It is a terrible idea to be printing money to prop up asset owners. If that is the basic plan anyway, it shouldn't be mandatory to have incompetents mediating the handout process.
And it isn't like bankruptcy is that terrible. All the physical assets still exist. There is still food. Maybe set up a special welfare system for people who lost their life savings if something has to be done, but for heavens sake, taking (and I repeat myself) known, verified incompetents and guaranteeing them ongoing control of the financial system is wildly stupid. It is on par with a scheme like mandating people all buy in to cryptocurrencies.
It's because the markets were frozen up; I was actually alive then and you can't really gaslight me about this
Perhaps I'm misunderstanding, but isn't this another way of saying it was too risky for people to invest? That seems to be the same concept as the quote you cited from the parent comment: "either the return wasn't commensurate to the risk".
And then we see 20 good years of economic prosperity where the US predictably got even wealthier than it previously was and there is great political stability and well-loved presidents like Mr Trump who represent the satisfaction US citizens feel for the economic highs they have reached!
What a fantastic deal for the average taxpayer. Let the confetti fall. Well done government, saved the day there.
If you just look at the economic indicators, then it did. Certainly way better than the "no intervention" counterfactual would have gone. People do not like it when all the ATMs stop working.
There is a lot of discourse to be had as to why people aren't feeling that personally.
> killing people in Iraq because Muslims, amirite? All those bombs cost a bomb.
Sadly there is/was massive bipartisan support for this bullshit. Including from the public. I note from a chronology perspective that most of the money in Iraq was spent/lost/wasted before 2008.
Whereas the federal government can write a check for $633.6 billion and be much more certain the debtors will survive and pay it back.
That is, the big risk is "what if the state doesn't intervene?"
Correspondingly, the state has a special move that only it can play, because "what if the state doesn't intervene" is not a risk to the state itself. The act of intervening makes the risk go away. That's part of the privilege of being the lender of last resort with the option to print currency.
(which is why this was a much more serious problem for Greece and Ireland, which as Eurozone members were constrained in their ability to even contemplate printing their way out of the problem!)
I do agree it looks bad if bankers can take huge risks and benefit (personally) from the upside without a downside risk. But it's not necessarily the bailout that's the problem here and the taxpayers do have the theoretical power to vote for people who can change this.
What courses of action does that argument not justify? "We had a predictable emergency and decided to panic and hand out money. Don't expect us to really think about alternatives." is not the course of action that really speaks to me for getting good results for taxpayers, or anyone except the people directly getting the money.
We have a playbook for getting a statistically good outcome when people run out of money. It is called bankruptcy. I can see how a banker could confuse that with a bailout because they both start with a "b" and there are a lot of letters - but the stark truth is they are different words.
So this argument doesn't justify any course of action but is does justify a course of actions with poor optics that seems reasonable given the risks.
This is a very valid narrative, although if you say it in public people will call you a socialist. It applies to people like Fred Goodwin of RBS (eventually stripped of knighthood) and Sean Quinn of AIB (who did actually serve jail time).
> And it isn't like bankruptcy is that terrible. All the physical assets still exist. There is still food
I think you're really underestimating how terrible "retail banking stops functioning" would have been in the short term. The loans allowed the problems to be addressed over the medium term. "Every retail bank has ceased trading" is a problem you have about three days to solve before the inability of people to buy food and petrol starts a much larger collapse.
Besides, some of the bailouts were very close to "flat-pack" bankruptcies. Northern Rock and Bradford and Bingley were fully nationalized! Equity holders lost everything, that's a bankruptcy!
(Americans will say "who" there, but again: it was a global crisis. It more resembles climate change. It's very difficult to say that any individual is responsible for it, but somehow Australia ends up on fire as a result of unsustainable emissions, and the banking system collapsed as a result of unsustainable lending emissions.)
I would however like people to be a bit more specific about what they think the crime was, who specifically committed what, and whether it was actually illegal at the time. It's a word people love to throw around. It's not actually illegal to make poor business decisions.
https://en.wikipedia.org/wiki/Se%C3%A1n_Quinn for example, while his misconduct cost the collapse of AIB, the thing he was actually jailed for was failing to comply with court orders.
I was surprised to learn that the "bailout" was in fact a loan that was repaid with interest for a "net profit of $121 billion" [1] rather than just giving the banks money. After learning this, I polled many people around me and few had understood the terms of the transaction. So I think there may be significant public misunderstanding there.
Even if people do understand it was a loan, there's an argument to be made that the money could have been spent in better ways (e.g. early education improvement, preventative healthcare etc. that also give long term returns in preventing crime and reducing healthcare costs). If you believe not giving the loans would have caused the total collapse of the economy and worsened of all of those things (crime, healthcare, education etc.), then it seems a worthwhile investment. But not everyone may share that perspective.
> What part of that are people mad about, and why?
Another element of the controversy was the payment of $218 million of bonuses to the executives of AIG which was being bailed out and effectively run by the federal government [2]. Apparently the government allowed the bonuses because Geithner said there was no legal basis for voiding the bonus contracts.[3]
Some people think controversy over government mortgage relief spawned the Tea Party movement based on this speech by Rick Santelli [4] about his dissatisfaction with the government's bailing out the "losers" who couldn't afford their mortgages.
Some people also feel there could have been more regulation of the financial sector or breakup of big banks [5] or more stipulations attached to the loans.
Just some suggestions based on my understanding of the history.
[1] https://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program#...
[2] https://en.wikipedia.org/wiki/AIG_bonus_payments_controversy
[3] https://youtu.be/uYJLyGoWbzY?si=geM87strQlH7EURN&t=1079
[4] https://youtu.be/5v1EtiEuSEY?si=055bAuiZiIq-YHXy&t=3023
[5] https://en.wikipedia.org/wiki/Brown%E2%80%93Kaufman_amendmen...
If you can't understand why people are angry that the government continues to give away large amounts of corporate welfare without protecting people, then I'd definitely read up on people movements because a few are brewing across the country and all of them want blood.
What's your source?
The idea that 4 of the largest investment banks in the US were destroyed is not just utterly false, it’s hard to imagine how one could interpret the outcome in this manner.
Why would anyone be happy that the government offered handouts that were stolen, low-level criminals prosecuted, meanwhile every single principal who was culpable went unpunished?
I don’t need to hear from you how this is off-base or I’m misunderstanding. I’m close to principals involved in the crisis and worked for years in the response to it, and have heard what went on in the meetings dramatized afterwards.
Who, specifically, was culpable for what? I appreciate that anger is not a charge sheet, but .. we could actually do with a more enumerated list of who specifically did which specific illegal act, in order to have a proper discussion.