Do u think that most people assume that if Banks were allowed to fail, then people on main st would

[LeftyAndProud60]

be debt free? I honestly think people believe that.

[WorseBeforeBetter]

1. This person doesn't.

And while I realize Americans can be pretty stupid, I doubt the let-them-fail crowd believes it either.

[FrenchieCat]

2. It was really a "Just say No" argument,

when they were knew no one was going to let that happen.

It's always easier to argue for something that is nothing but speculation.

[girl gone mad]

11. I don't know anyone that was arguing 'just say no'

There were several very solid arguments against the bailouts, from varying political and economic perspectives. The most credible centered around the fact that we were throwing good money after bad, the bailouts were hastily put together and there was limited oversight and few strings and the money would be better spent shoring up the good banks. Many top economists preferred a bailout based on the Swedish model of nationalization (or pre-privatization if you'd like a less loaded term), where management would be ousted, those who made dangerous gambles would face writedowns and the big banks would be broken up.

Most of the arguments the bailout critics proffered turned out to be true in time. Despite the promises, banks did not increase lending. The money was used to pay off counterparties and bondholders (many of who were foreign banks and investors), to speculate, and, of course, for the bankers to give themselves huge bonuses. By many accounts, the TBTF banks are still faced with the same underlying insolvency issues. Housing is still weak. Unemployment is still sky high. The moral hazard we created has enabled a new round of greed and excessive risk-taking on Wall Street. New evidence lends credence to the idea that banks are essentially creating credit out of thin air, therefore there is absolutely no reason we need continue to prop up these giant zombies.

[RKP5637]

3. No, I don't think all think so. IMO what really gets to people are the bailouts for

the ones that caused the mess, and maybe that they could tolerate. I think the bonuses push most over the edge, and sometimes the reaction is throw the entire mess out.

[On the Road]

4. Do People Think That if the Banks Failed

their employers would still be able to write their paychecks?

[Ozymanithrax]

5. No. People just think it is unfair. If people fail they go bankrupt...

Few people understand the disaster that would have followed the collapse of most of the banking sector. When the bankers that were one of the major causes of the problem were given a get out of penury free card, because the banks going down would have screwed everyone, all people saw was the monumental unfairness of the whole thing. In the modern world we must have banks.

Half the companies in the U.S. don't make enough money form week to week to meet their payroll. Many stores operate in the red until the Christmas season. Imagine what would happen if these stores let go half of their employees or more because they could not get short term credit to make payrolls. I'm not just talking retail. I worked for both Motorola and BAE, and they constantly relied on short term credit to keep payrolls and projects running. They made big profits, but they rarely made it in a steady way that allowed them to pay the workers.

[girl gone mad]

7. Your post would make a lot more sense if credit and lending actually expanded.

In point of fact, credit has continued to contract every month since the bailouts.

ETA graphic:

[Ozymanithrax]

8. But banks weren't gone in an instant.

They are still here. Keeping them alive is a central theme of Keynesian economics, as was massive investment in the public sector (resucing the auto companies). If anything, the U.S. didn't do enough.

China per-capita spent about twice what the U.S. did in bailouts. They are growing at better than 8% per year. The U.S. did pretty much Japan did in the 90's when the Tiger economies collapsed. Japan did not put enough support into its economy and it has never really recovered.

[girl gone mad]

9. They were never in danger of being "gone in an instant".

Geez.. the things people say..

Are you really arguing that we should have poured MORE money into our zombie banking system? That's really the argument that you want to make?

And, by the way, China took the opposite route in stimulating their economy than we did. We propped up the banks, they poured money into the bottom of the system and shored up labor - which is the kind of thing most of the people on the left were arguing for.

If you want to compare national bailouts, we took the course Japan took in the 90s. The one we told them not to take, at the time. How's Japan doing, 20 years later?

[Ozymanithrax]

12. As I said, Japan has yet to recover..

I think we had to prop up the banks, and should have put a hell of a lot more money at the bottom to save jobs. We did not, and the piss poor job recovery may be a major symptom.

I also think two of the biggest mistakes that led to this economic collapse were fighting the war on credit and Bush's Ownership initiative. We have poured a trillion dollars down the rabbit hole of war. What could we have done with that money and the lost opportunities? The Ownership initiative was designed to create a housing bubble. All bubbles pop. But once the economy went to shit we had a choice of trying to hold things together or just to let it go.

Saving the banks was necessary, but we should have saved more. We may not have slid into a depression, but we need to do more than that.

[Skink]

10. You say that about China like it was no big deal.

Maybe our Goverment here feels that way about what we did but pretends that it is as outraged as the citizens.

[Ozymanithrax]

13. Clearly, in the short term, China did the right thing.

I read an article today where some people think China may have just created a bubble of their own that will burst, with disastrous consequences. We will have to wait and see what time brings.

[girl gone mad]

6. Umm.. not even close.

Thanks for playing.

ETA: I find these threads extremely entertaining. It's interesting to see how people of limited knowledge of the bailouts and of finance in general perceive things. It does make illuminate to some degree why Wall Street was able to perpetrate the fraud, why the housing bubble went on for so long, why regulation often fails and - for the love of god - why we must start teaching economics in elementary school and continuing through high school.