What would have happened had we not bailed out the banks with Tax payer money?

Im certainly no economist so don't have the ability to answer the question. It seems that the bailouts saved Banks from going bankrupt and as a result saved many other private institutions in the process.

I see many on ATS, myself included who despise the idea of using public finances to prop up private institutions. However, had we not bailed out these private Banks, the results for people around the world would have been much worse.

The main question is: what would have happened if we didn’t do the bailout?

All of the banks would have gone bankrupt. Forget about fault for a second. (Was it the change in mark to market accounting rules in November 2007? Was it the aggressive subprime mortgage lending? Was it the shortsellers? Was it the run on the banks? Who knows.) Morgan Stanley (MS) would have definitely gone bankrupt. Then Wachovia. Then Citigroup. Then Goldman Sachs, Bank of America (BAC), etc.
Would this have been a good thing or a bad thing? Very bad. Read on.

seekingalpha.com...

From this article things would have got really bad, not just effecting banks, but pretty much everyone. I'm interested to know what ATSers think and whether there is a counter argument for the bailouts.

The government taken over banks here are doing a better job than PRIOR to them being government owned or partially gov owned.

Instead of forclosing morgates, they are renegotiating the terms of failing morgates and because of that the banks are now FAR MORE profitable! Even out performing other banks.

I feel safer knowing the bank here is 50% government owned lol.

Letting the banks fail may have been bad, but not much worse than saving them like we did. Personally I think we should have nationalised them and split them up into good banks and bad banks like they did in Sweden. Worked well there and the taxpayers losses were minimized. The idea of rewarding the very fools who caused the mess pisses me off, they should have there pay clawed back and be thrown in prison, just my opinion.

It pisses me off that they saw no parts of the consequences of conducting business the way they did other than public ridicule... they still get their fat bonuses, still own their yachts and private jets still living a royal life. ALL of that should have went away.

Originally posted by Watts
It pisses me off that they saw no parts of the consequences of conducting business the way they did other than public ridicule... they still get their fat bonuses, still own their yachts and private jets still living a royal life. ALL of that should have went away.

It is going away, caps on bonus pay and so on. Sure they whine that why are worth more, fine, get 3 people to do their job for less

reply to post by zookey


Lol im not sure people in the US or UK would share your feelings, Big Corp or Big Brother, both are **********

Originally posted by Vanishr
reply to post by zookey

 

Lol im not sure people in the US or UK would share your feelings, Big Corp or Big Brother, both are **********

UK governemnt owns 50% of Lloyds TSB, which owns Bank of Scotland which owns Halifax which also has offshore Jersey and Isle of Man banks.

It is because of that ownership that that bank is now out performing others, and because they are not force closing morgages, they are reagreeing the terms in order to get money from morgage borrowers rather than end up with a lot of assets (houses) that they cannot sell on a market where people cannot get morgages.

reply to post by woodwardjnr


Maybe someone could explain to me how this was a bad idea, but in my view, had we just either given all the TARP funds, etc., back to the people -OR- used it to pay off all mortgages directly (I believe I heard that the original 700 billion was enough to do this), the banks would have been taken care of, all homeowners with mortgages would now *own* their homes outright, that extra money they would no longer be spending on mortgages would be actually in their pockets and stimulating the economy, and we'd be a lot better off.

Instead, we have execs making big bucks, people underwater, a housing industry in crisis, a crippled economy, and hurting citizens.

I'm by no means an expert on any of this, but can someone with better knowledge let me know if I've missed something here? I think the money just went entirely the wrong way, forcing me to ask if this isn't by design...

With the money spent bailing out the institutions that should have failed the government could have recapitalized the banking system. If you add up all the backdoor bailouts along with TARP, thats about 10Trillion by some estimates (and I think that is lowballing it) that would have been more than enough to create enough banks with enough capital to keep the gears running on the financial system long enough to get through this.

It would have been painful for us all had they been allowed to fail, but we would be almost three years into the rebuilding process now instead of still waiting for the pain. It will be worse in the not too distant future than it would have been had they been allowed to fail in '08. They have transferred their insolvency to the .gov and the taxpayer while their wives flout their wealth in the Hamptons.

Didn't realize it was an Altucher in the OP's post. He's one of the biggest shills for the Street around. Of course he would give a grim opinion of what happened. He probably benefited mightily from the the bailout.

reply to post by jefwane


Sorry I didnt check the guys credentials in the link I provided. Im a little wet behind the ears when it comes to knowing who's shilling for who.

Thanks for your post it was interesting and provided another perspective for me.

reply to post by Praetorius


I've heard that idea floated around before and the numbers seemed to bear it out. You might very well be onto something.

Question.

I cannot for the life of me find an accurate grand total for all the combined bailouts.

If anyone could help me out and post that number I'd like to divide it by 307 Million (number of US citizens).

I have a feeling the final number is going to be amazing.

I think a better way to ask this is:

What would have happened if the Gov't gave each citizen of the USA that money?

For me, I would have paid off my house, kids college bills, etc etc.

I would have stimulated the economy more with my measly cut of the pie than all the banks have combined.

Originally posted by Praetorius
reply to post by woodwardjnr

 

Maybe someone could explain to me how this was a bad idea, but in my view, had we just either given all the TARP funds, etc., back to the people -OR- used it to pay off all mortgages directly (I believe I heard that the original 700 billion was enough to do this), the banks would have been taken care of, all homeowners with mortgages would now *own* their homes outright, that extra money they would no longer be spending on mortgages would be actually in their pockets and stimulating the economy, and we'd be a lot better off.

Instead, we have execs making big bucks, people underwater, a housing industry in crisis, a crippled economy, and hurting citizens.

I'm by no means an expert on any of this, but can someone with better knowledge let me know if I've missed something here? I think the money just went entirely the wrong way, forcing me to ask if this isn't by design...

It sounds good but i dont think we could have done that and it turn out good. Thats $700billion that would flood the market creating instent inflation. Now because it went to the banks it was held in close Circles and never got on the market.

What would happen if we let them fall? Small ma and pop banks would have filled the void GLADLY and we would not have so many monster banks. but it helps to have friends in high places to give you billions

The banks shouldn't have been bailed out! This could go on for ever, they fail we pay. When is it supposed to end? They will do it again there is no doubt in my mind.

reply to post by Hessling


You might not want to even base it on 307 million, since you have to take into account that a good number of those are children, etc., who have no liabilities such as mortgage or direct tax burden otherwise.

As stands, though, just with the official TARP total of $700 billion, you're looking at about $2,280 for all 307m US citizens. When you look at actual outstanding mortgages and the like, though, that share is divided by a much smaller number so increases significantly. Would like to see someone with access to the numbers do some crunching, though.

Originally posted by Uncle Gravity
The banks shouldn't have been bailed out! This could go on for ever, they fail we pay. When is it supposed to end? They will do it again there is no doubt in my mind.

They fail we pick up the tab, when they make money they keep it. Sounds like a hell of a Business plan to me. Wish i was a banker

Thet should have been allowed to fail. The US will eventually have to return to the nothing from which it came to rebuild. Credit is a lie and always has been. Yes there would have been suffering, and death, but poverty is freedom, alliance with currency is enslavement. Increasing the number of unemployed would add to the numbers of those with nothing left to lose, hopefully pissing enough people off to actually make a stand and fight back against corporations and government and take back our lives from these parasitic organizations. People should stop waiting for the inevitable, communicate with one another, pick a day, and everybody rush the banks and close their accounts. We can bring about the change we need. This is all a bandaid, time to rip it off.

What would have happened? The natural progression of capitalism. The banks who mismanged their money and their businesses and maybe a few others would have gone out of business. And we would have dealt with it.

Along the same lines of your thinking, what the miraculous should happen if was stops? Do we bail out all the military contractors and all the people who rely on war for their business?

In both cases, were these not risks they took when they started these businesses and made all their profits?

How does the fact that they put all their eggs in one basket without risk and contingency plans somehow become our problem?

Same goes for the airlines we repeatedly bail out. Price of fuel goes up, they pass it on to the consumer and STILL whine for bailouts if fewer people then fly. So let them go out of business. So what if they do?

Yes this would all lead to temporary rises in unemployment and have somewhat of a rippled effect, but probably not as much as the economic fearmongers, many of them lobbyists for these very same companies, would have you believe.

Government and taxpayer intervention are temporary stopgap measures at best.

Socialism is scary when it benefits the people directly but not when it benefits failed capitalists?

Not letting them all crash and burn for their stupidity is just delaying the inevitable and subsequently making the inevitable much worse.

We've been doing this for decades with each bubble.

We arent even over this collapse and here they are all set to do it all over again:

www.abovetopsecret.com...

There's no room under the carpet to sweep anymore dirt. And rather than having to deal with a little dirt when it appears we're going to have to deal with an entire room of filth.

reply to post by camaro68ss

It sounds good but i dont think we could have done that and it turn out good. Thats $700billion that would flood the market creating instent inflation. Now because it went to the banks it was held in close Circles and never got on the market.

Yes and no - I may just be exposing my ignorance here again - but if the money was given directly to the banks, with requirement that it goes to all outstanding mortgages - wouldn't this have prevented any immediate impact to the economy other than good, and wouldn't the banks just be holding the money at that point anyway? Instead, money went to the banks and did...what, exactly? Head straight for pockets?

Like I said, I may be missing something here, apologies if I'm just being dense.

What would happen if we let them fall? Small ma and pop banks would have filled the void GLADLY and we would not have so many monster banks. but it helps to have friends in high places to give you billions

Well said. I also heard the idea floating of letting them fail and then using that TARP money to open 7 new national superbanks with $100 billing in capital each.

Neat idea, although I'm not sure how that's better than just paying off the mortgages directly?