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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

#301

Post by rhino369 »

asta42 wrote: post #118
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…

And not only is there absence of criminal responsibility, but the regulation that made banking stable for 100 years and was taken away in 90s (like the Glass-Steagall Act) cannot be put back in place. Seems like people that caused the GFC are the ones in charge of 'fixing' it.

Glass Steagal didn’t make banking stable. Most countries (including those who weathered the storm much better than the US) don’t have a similar law.

In fact, marrying investment and commercial banks during the crisis was a key part of stopping a banking collapse.

And the whole crash started by investment only banks failing.

Re: The Real Cost of the 2008 Financial Crisis

#302

Post by [deleted] »

OscarCunningham wrote: post #267
api wrote: post #239

Earlier quoted context omitted.

Americans (even some center-left ones) hate the idea of directly supporting anything, so cheap loans were used as a substitute for directly operating and funding public colleges. Same with housing. Directly supporting people is "socialism," a handout, and is seen as supporting laziness and vice. A loan must be paid back, which allows many Americans to view it as something encouraging responsibility and virtue. It all…

Wouldn't directly supporting people also produce price inflation?

[deleted]

Re: The Real Cost of the 2008 Financial Crisis

#303

Post by 394549 »

pitaj wrote: post #268
ptero wrote: post #173

Just a personal observation / data point as a lot of folks everywhere are saying "put bankers in prison" any time they recall 2008 crisis. This is from the US, no idea how things played out in other countries: Government shares a significant portion of the blame for this crisis. It required raising affordability of homes (i.e., loans) for lower income families. They might as well legislate away entropy, friction or g…

Don't forget another thing the government did: previous bailouts. When large banks were told they were "too big to fail", they heard "your risks will be subsidized by taxpayers", so of course they took on more risk. We should have let the banks fail, if they really were going to. Another thing: monetary policy causing business cycles, or making them much worse. The recent money-printing by the fed is super scary to m…

> Don't forget another thing the government did: previous bailouts. When large banks were told they were "too big to fail", they heard "your risks will be subsidized by taxpayers", so of course they took on more risk. We should have let the banks fail, if they really were going to.

Why couldn't the stockholders get wiped out when a TBTF bank gets bailed out?

To me, that seems like a fair compromise that protects the economy but still punished excessive risk taking.

Re: The Real Cost of the 2008 Financial Crisis

#304

Post by tootie »

brobdingnagians wrote: post #3
nafey wrote: post #2

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

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. It would be far better to have economic corrections along the way with little dips than to keep the house of cards going on worse and worse foundations until it all falls apart in a large depression. Little distortions can be corrected in the short term, but keeping th…

In the long run, we're all dead.

Re: The Real Cost of the 2008 Financial Crisis

#305

Post by tootie »

nafey wrote: post #2

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

Less generous bailouts for one. A lot of creditors were just straight up reimbursed for making bad investments with no penalty. Having them be wiped out would be a disaster, but asking to accept losses in exchange for not being wiped out would have been a good compromise. The other option, which we didn't have at the time but do now, is for the federal government to take over failing banks to keep them afloat long enough to be dismantled. It's called orderly liquidation.

Re: The Real Cost of the 2008 Financial Crisis

#306

Post by School-Cotton »

394549 wrote: post #303
pitaj wrote: post #268

Earlier quoted context omitted.

Don't forget another thing the government did: previous bailouts. When large banks were told they were "too big to fail", they heard "your risks will be subsidized by taxpayers", so of course they took on more risk. We should have let the banks fail, if they really were going to. Another thing: monetary policy causing business cycles, or making them much worse. The recent money-printing by the fed is super scary to m…

> Don't forget another thing the government did: previous bailouts. When large banks were told they were "too big to fail", they heard "your risks will be subsidized by taxpayers", so of course they took on more risk. We should have let the banks fail, if they really were going to. Why couldn't the stockholders get wiped out when a TBTF bank gets bailed out? To me, that seems like a fair compromise that protects the…

Because there's no law allowing that currently, and Constitutionally you can't just make it up after the fact

Re: The Real Cost of the 2008 Financial Crisis

#307

Post by TheLoneAdmin »

School-Cotton wrote: post #306
394549 wrote: post #303

Earlier quoted context omitted.

> Don't forget another thing the government did: previous bailouts. When large banks were told they were "too big to fail", they heard "your risks will be subsidized by taxpayers", so of course they took on more risk. We should have let the banks fail, if they really were going to. Why couldn't the stockholders get wiped out when a TBTF bank gets bailed out? To me, that seems like a fair compromise that protects the…

Because there's no law allowing that currently, and Constitutionally you can't just make it up after the fact

Sure, there were plenty of laws allowing that. Bankruptcies happen every day, with plenty of legal framework. The depositors were all protected by FDIC.

Re: The Real Cost of the 2008 Financial Crisis

#308

Post by GreeniFi »

Isamu wrote: post #190
ptero wrote: post #173

Just a personal observation / data point as a lot of folks everywhere are saying "put bankers in prison" any time they recall 2008 crisis. This is from the US, no idea how things played out in other countries: Government shares a significant portion of the blame for this crisis. It required raising affordability of homes (i.e., loans) for lower income families. They might as well legislate away entropy, friction or g…

>Government shares a significant portion of the blame for this crisis. Agreed, I think the sheer size of the crisis relates back to deliberate policies to support sub-prime lending. The idea was to help people to afford homes even though they would not normally be considered a good risk. But opening this up created a vast new market, like adding a wider bottom tier to an already giant pyramid. Along with the vast siz…

In saying that the government shares the blame you overlook the fact that it was a cabal across both banks and government, separated only by a revolving door, that both created then coordinated the response to the crisis. Allocation of blame in this scenario is difficult.

Re: The Real Cost of the 2008 Financial Crisis

#309

Post by paulddraper »

Gys wrote: post #264
paulddraper wrote: post #254

Earlier quoted context omitted.

Study of High Net Worth Philanthropy is published every few years. https://www.ustrust.com/publish/content/application/pdf/GWMO... That's focuses only on the wealthy ($200k income or $1m assets), but within that group, higher incomes consistently donate a greater percentage to charity.

The research in this article (2010) tells a different story: https://www.nytimes.com/2010/08/22/magazine/22FOB-wwln-t.htm...

The original research (not NYTimes journalism) is actually from 2001 [1]

1. Of the income groups studied, the highest percentage of income donated was from the But the study's highest income division was only $100k. Had they included more ranges, they would find that giving goes much higher, e.g. $200k-500k donates 8.3% and $2m+ donates 14.0%. [2]

2. Also in the original study (though absent from the NYTimes article nine years later), is the finding that more people donated at the higher income levels. 77% donated in the lowest income group, but 97% donated in the highest.

And I would give that fact considerable weight for supporting the assertion "if the common folk of Europe were doing economically better, they would have been more generous".

[1] http://www.cpanda.org/pdfs/gv/GV01Report.pdf

[2] https://www.philanthropyroundtable.org/almanac/statistics/wh...

Re: The Real Cost of the 2008 Financial Crisis

#310

Post by paulddraper »

slg wrote: post #278
paulddraper wrote: post #247

Earlier quoted context omitted.

The U.S. does that. Loan interest and capital gains are treated much differently by the U.S. tax system if they are on a primary residence rather than on other assets. (More often than not, I see criticism of this on HN.)

Those benefits are regressive which results in the them barely moving the needle for working or middle class families. It goes back to the original comment in this thread that it is implemented in such a way that it has a nearly opposite result to its supposed intended effect.

I agree. That is often the case with taxes and tax incentives.
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