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The Real Cost of the 2008 Financial Crisis

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Re: The Real Cost of the 2008 Financial Crisis

#91

Post by freddie_mercury »

nafey wrote: post #2

But what was the alternative to the bailouts? Another depression? I feel we made it across fairly well.

This comment reads like a hot-take based solely on the subject without reading the article because you don't really engage substantively with any of the nuances the article talks about. As such, I'm not sure it really contributes as much to the discussion as if you did engage substantively with the details of the article.

For example:

Even if there was no alternative, that doesn't mean a clear understanding of the costs & downstream consequences is a bad thing.

Even if some kind of bailout was necessary, bailouts can take many forms. Do you think the bailout chosen was the best form?

There wasn't, actually, one bailout. There were many ad hoc choices made along the way. Why was Lehman allowed to fail? It was purely an ideological choice; the Fed clearly had the ability to save it, they just underestimated the pain it would. Why were swaps extended to some countries but not others? Why didn't the ECB help out Hungary or even Austria?

For that matter, why was the Federal Reserve acting as a global lender of last resort without telling anyone, not even Congress. (It required a Freedom of Information lawsuit that went all the way to the Supreme Court for the Federal Reserve to turn over details on the full scope of their swaps with other central banks.)

Maybe the bailouts should have happened exactly as they did but the optics & politics should have been done in a more transparent fashion?

But taking such a non-nuanced, instrumental view I feel like you make the discussion less interesting than it could otherwise have been. And because it was a "first comment", it then warped much of the entire discussion on the topic. This thread has 80 replies and 55 of them are to you.

Re: The Real Cost of the 2008 Financial Crisis

#92

Post by pas »

lotsofpulp wrote: post #77
ThomPete wrote: post #70

The best explanation I have heard of the financial crisis was in the book "The End of Alchemy: Money, Banking and the Future of the Global Economy" by the former head of Bank of England. It makes the convincing case that there is no real single place to point fingers and that the crash was the logical consequence of people all doing the "right thing" I can highly recommend it as it also takes a historical view of mon…

I can point to all the underwriters that approved loans with no income verification, fraudulent paperwork, officially stating they did checks for a physically impossible number of mortgages.

Were these loan sharks prosecuted? Probably yes, but that won't bring back the lost percents of GDP.

Re: The Real Cost of the 2008 Financial Crisis

#93

Post by dhimes »

andrepd wrote: post #41
nafey wrote: post #2

But what was the alternative to the bailouts? Another depression? I feel we made it across fairly well.

The bailouts are controversial, but it's the bailouts AND the complete absence of criminal responsibility that's inexcusable. It is well known and documented that the financial crisis was no accident; everybody who headed the financial services industry to the state it was in did so knowingly , knowing full well the inevitable consequences, but not giving a damn because the arrangement let them to become handsomely w…

complete absence of criminal responsibility that's inexcusable

This is what gets me- and they were even given relative anonymity in the press so they could duck some social repercussions of their horrid behavior. I want Brad Pitt to carve a dollar sign on their foreheads.

tithing part of our work to reimburse their losses

I'm stealing this.

Re: The Real Cost of the 2008 Financial Crisis

#94

Post by josefresco »

lotsofpulp wrote: post #77
ThomPete wrote: post #70

The best explanation I have heard of the financial crisis was in the book "The End of Alchemy: Money, Banking and the Future of the Global Economy" by the former head of Bank of England. It makes the convincing case that there is no real single place to point fingers and that the crash was the logical consequence of people all doing the "right thing" I can highly recommend it as it also takes a historical view of mon…

I can point to all the underwriters that approved loans with no income verification, fraudulent paperwork, officially stating they did checks for a physically impossible number of mortgages.

My anecdotal experience having applied for a mortgage during these crazy times (pre-2007) was that I could have put any lie on my application about my income and it would have been approved. While I took out what I thought was a "reasonable" mortgage, I could have gotten one 2x bigger without much trouble.

So, I agree with your point, not everyone was "doing the right thing".

Re: The Real Cost of the 2008 Financial Crisis

#95

Post by dhimes »

josefresco wrote: post #83
andrepd wrote: post #41

Earlier quoted context omitted.

The bailouts are controversial, but it's the bailouts AND the complete absence of criminal responsibility that's inexcusable. It is well known and documented that the financial crisis was no accident; everybody who headed the financial services industry to the state it was in did so knowingly , knowing full well the inevitable consequences, but not giving a damn because the arrangement let them to become handsomely w…

Confidence in the market , and preventing panic was the highest priority, which is why no bank executive was punished in any meaningful way. Frontline did a great piece on this, which I watched years ago. Not sure if this is it: https://www.pbs.org/wgbh/frontline/film/meltdown/ I believe it also explains why the election hacking of 2016 wasn't and isn't being addressed fully. If the US were to admit actual votes were…

Throwing the bad guys in jail would have spurred even more confidence in the market. The same guys are still in charge.

Re: The Real Cost of the 2008 Financial Crisis

#96

Post by pas »

TheOtherHobbes wrote: post #25
thecopy wrote: post #5

Earlier quoted context omitted.

> We haven't escaped the depression; the bailouts and quantitative easing simply delayed it for a bit, and the more it is delayed, the worse it will be. How so?

The economy has become an absolutely horrific place for most of the population. Financial security is an unrealisable dream for most workers. Bailouts saved the economy for the proverbial 1%, who are doing wonderfully. But no one else is. (I'm including many HN readers in the 1% because they work in a privileged and relatively highly paid part of the job market.) When the mountain of debt finally implodes, it's going…

A no-bailout crash would have hurt the 99% even more.

We all can kumbayaa about how the Fed enriched the asset holders, and how unfair that is, but they did what they were able to, while Congress did nothing. (The Obama stimulus was too small, and no reform followed, the 2010 Dodd-Frank Act was a mere correction of something that should have been there all along.)

The mountain of debt imploded in 2008, and since then financial regulation is very much systemic stress test based. The next crisis will be at least different. Bankers can just sit back, relax, and watch as the world burns around them.

Re: The Real Cost of the 2008 Financial Crisis

#97

Post by guelo »

ThomPete wrote: post #70

The best explanation I have heard of the financial crisis was in the book "The End of Alchemy: Money, Banking and the Future of the Global Economy" by the former head of Bank of England. It makes the convincing case that there is no real single place to point fingers and that the crash was the logical consequence of people all doing the "right thing" I can highly recommend it as it also takes a historical view of mon…

Everybody gets their propaganda from different places but I'm pretty sure the European political upheaval was caused by the Syrian refugee crisis not the welfare system.

Re: The Real Cost of the 2008 Financial Crisis

#98

Post by Marazan »

vinceguidry wrote: post #14

The takeaway I got from reading the article to the end does not match the impression given by the headline, though the headline isn't exactly wrong, per se. The conclusion given is that the mechanisms put in place to avoid another recession work just fine but that the political will to use them has been dried up by the political retrenchment of the right. That said, if you're at all curious, you should read the artic…

The alt-right are ficking Nazis. Say it with me: Nazis are bad.

Sorry if that hurts their feelings.

Re: The Real Cost of the 2008 Financial Crisis

#99

Post by pas »

sampo wrote: post #11
nafey wrote: post #2

But what was the alternative to the bailouts? Another depression? I feel we made it across fairly well.

The Wikipedia article has a list of proposed alternatives. https://en.wikipedia.org/wiki/Emergency_Economic_Stabilizati... Especially I'd like to point out the one proposed by Paul Krugman. Instead of injecting money into the banks, the government invests the money in the banks, diluting the previous shares. After the crisis, the government starts selling their shares, getting at least part of the money back. https:/…

> After the crisis, the government starts selling their shares, getting at least part of the money back.

Wasn't TARP repaid?

Re: The Real Cost of the 2008 Financial Crisis

#100

Post by pas »

icu wrote: post #18
wiz21c wrote: post #8

Earlier quoted context omitted.

As a parent, I fail to see exactly how I'm guilty of anything here. I used the banks because I had to, I listened to their advice because I can't possibly become an expert on their subjects, etc. I even voted for people who want to regulate them. I don't play on the stock exchange (pension funds do, with my money). I didn't do anything wrong. My children will pay for the mess a few made by pushing unreasonable expect…

I'm with you on decent alternatives of which I think a non-Fed based monetary system as well as the end of crony capitalism (not capitalism itself) would probably be a decent alternative. However, the biggest problem is the education of the wider public and garnering the democratic will of the people to make necessary changes. Economics, for all its show of being empirical is really just politics, and politics is rea…

> a non-Fed based monetary system

Could you elaborate on that please?

> Economics, for all its show of being empirical is really just politics, and politics is really just philosophy.

That's very-very incorrect. Economics is about models, and understanding the past, and maybe trying to peek at the future. But at its core, it's about modeling.

And it helps us understand what works and what doesn't. Politics should be about giving the parameters to those models. And philosophy (logic) is about finding the inconsistencies in our politics.

And as you say, nowadays people don't care about logic, they care about their beliefs. Even if they are inconsistent. They are too busy to notice that they are wrong.

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