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| ▲ | sehansen 13 hours ago | parent | next [-] | | Hundreds of financial institutions with greater or lesser responsibility for the crash in 2008 went under in those years[0]. The shareholders in almost all of these companies lost all of their money and the responsible employees lost their jobs. This includes some of the most guilty companies, like Washington Mutual, Countrywide Financial, IndyMac, Lehman Brothers, Merrill Lynch (through First Franklin Financial), Bear Stearns. But all these companies are completely forgotten now. Instead everyone hates on Goldman Sachs. Sure, Goldman Sachs deserves hate, but of the big banks they were the _least_ guilty of the crash in 2008. Not saying they were saints, but in 2008 they were the least bad. 0: This list only covers banks, not non-banks like Countrywide Financial: https://en.wikipedia.org/wiki/List_of_bank_failures_in_the_U... | | |
| ▲ | lenerdenator 10 hours ago | parent | next [-] | | When you have people at the top of those institutions who made those decisions, and made enough money during their tenures to weather any length of unemployment and were sometimes even given a severance worth more money than the average American makes in a lifetime, going out of business or losing a job simply isn't enough. It's one of the only investments of labor and time where the risk is not proportional to the return. In order to create risk, you have to either claw back their money through civil action - which you can't because the entire point of incorporation is to separate the business entity from one's personal finances - or look at criminal charges. Otherwise, you have created a class of hyper-wealthy people who have no real incentive to perform in a way that is for the best interests of shareholders or society at large. It's the reason we tie so much for regular people to employment in the US, like healthcare. Many argue that if you give the rank-and-file worker the kind of long-term financial security that just one or two years of being a C-suite executive at a major company, they won't work as hard. They won't make the best decisions. They won't be the dynamic workers our economy supposedly wants. That logic goes right out the window when a board goes hunting for a new CEO. There's zero real risk involved. | |
| ▲ | keernan 10 hours ago | parent | prev [-] | | >The shareholders in almost all of these companies lost all of their money How is that penalizing those responsible? Isn't it a pretty big leap to go from penalizing those selling packaged fraudulent loans to the public (whom, to my knowledge were never prosecuted) to the shareholders losing money as protection against it happening again? |
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| ▲ | SoftTalker 14 hours ago | parent | prev | next [-] | | In fact we rewarded them. We bailed them out by printing a lot of money. We then printed more money during the pandemic to pay people to stay home and watch Netflix. Probably a lot more examples. All that money flowing around that has no basis in actual productivity or value created. It's got to correct at some point. One of the corrections is how much more everything costs now, but I don't think that has fully absorbed the excess. | | |
| ▲ | wussboy 14 hours ago | parent | next [-] | | I would argue the second instance (pandemic) was much more nearly what a good government should do than the first one | | |
| ▲ | pragmatic 13 hours ago | parent | next [-] | | Exact opposite. We are in the midst of the COVID hangover. So that govt money went to the wealthy to buy up houses (Californians bought real estate in the Midwest as investments and it drove up housing prices along with small immigration to these states) Farmers etc benefited from bailouts when they were doing very well. It was a large blunder. | |
| ▲ | superxpro12 12 hours ago | parent | prev | next [-] | | All that money directly led to housing inflation that still hasn't settled. The PPP loans were all forgiven (which massively favored business owners and upper class). Meanwhile student loan forgiveness was overruled by the supreme court. It's really hard to ignore the implication that it ended up being more like a wealth transfer than anything else. | |
| ▲ | SoftTalker 14 hours ago | parent | prev [-] | | It may be what they should have done, but the effect was still inflationary. There is no free lunch. | | |
| ▲ | piva00 13 hours ago | parent [-] | | It was inflationary but would spread out the pain over the recovery period after the crisis, the other option was to allow 100% of the pain to be felt immediately: economy shutting down, people losing their jobs, diminished household spending, less money circulating in the economy, businesses still running having fewer orders/customers, more people being laid off, all the way until the crisis passed. Between the latter and the former I believe the former was a much smarter choice in the medium to long term. |
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| ▲ | AnimalMuppet 12 hours ago | parent | prev [-] | | > We bailed them out by printing a lot of money. We did. We created about $4 trillion. That just about neutralized the $4 trillion that evaporated in the crash, and the result was that we did not go through a deflationary collapse. You know that they did not create too much, because inflation was basically nothing for the next decade. It was flat until Covid. Covid... yeah, that was inflationary. | | |
| ▲ | SoftTalker 7 hours ago | parent | next [-] | | Thanks, that was a perspective I hadn't thought about. But still doesn't seem like that taught any lessons, other than the taxpayers will bail out our carelessness. | |
| ▲ | irishcoffee 12 hours ago | parent | prev [-] | | I appreciate your posts generally, you have a lot of good insights. Do you think replacing that 4T was a good call? I'm struggling to see how it was the right play. | | |
| ▲ | AnimalMuppet 11 hours ago | parent [-] | | I think it was a good call, yes. A deflationary collapse is incredibly damaging to the economy. The Great Depression was such a collapse, but there are others. The Panic of 1857, 1873, 1907... there's a long history of these. The Fed avoided that. And they also avoided causing inflation. It was an amazing job of threading the needle. (One could argue that they caused a decade of stagnation, but in my view that was minor compared to the other options.) | | |
| ▲ | irishcoffee 10 hours ago | parent [-] | | Thank you for the thoughts. Do you think if we had ripped the band-aid off then it would have been completely disastrous? I don't mind saying that this economy is frustrating, and it feels like we keep kicking the can down the road. I'm confident I'm not the only person that feels this way, and I'm quite open to being wrong here. My guts says there's just too much money sloshing around, and it gets vacuumed up, leaving the majority feeling like nothing changed. I'm asking this in as non-confrontational way as possible, what am I missing? | | |
| ▲ | AnimalMuppet 8 hours ago | parent [-] | | I think you may be missing that $4 trillion evaporated in 2008, and the scale of the catastrophe that would have caused if the Fed did nothing. What the Fed did then was, essentially, restore the amount of money to what it was in 2007. They were trying to turn 2008 into as much of a "nothing changed" as they could, and they did it quite well. I think the economy can adjust to any amount of money; it's the abrupt change in the amount that causes problems (because it causes an abrupt change in the value of money). I think you may be missing that I'm not saying the same thing about the pandemic response. I think that too much money got poured in during the pandemic years, and that has caused inflation, and we've been seeing that inflation since. I wonder if you are taking how you feel about the last five or six years, and mapping that onto the last 18 years. Now, from 2008 to 2020 was not all roses. Things were kind of stagnant. The rich were probably doing better than you were, because assets like stocks and land went up in value as interest rates went down, but your wages didn't go up. So, it was reasonable for you to feel "there's too much money sloshing around" in things like stocks during those years. But I think it got worse after Covid. The government air-dropped too much money in, and there has definitely been too much money sloshing around since then. In all of this, I'm not really saying that you're wrong in feeling that there's too much money sloshing around, or that the economy is frustrating. |
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| ▲ | spwa4 13 hours ago | parent | prev | next [-] | | That's because debt IS money. Literally. If you create debt, you have created wealth. These people weren't punished so they could get back to creating new debt as quickly as possible.
The problem with credit defaults, especially private credit defaults, isn't that some private creditors lose some money, it's that twice that amount of money is destroyed, and disappears from the economy entirely. | | |
| ▲ | AnimalMuppet 12 hours ago | parent [-] | | > That's because debt IS money. Literally. OK. > If you create debt, you have created wealth. No, you have created money. Money is not the same as wealth. If you create money without creating wealth, then it's inflationary. Just a minor nit. The rest of your post I agree with. |
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| ▲ | badpun 14 hours ago | parent | prev [-] | | Consequences would be nice, but actually forbidding it for the future would be enough. Obama promised to do it, but didn't, and everybody kind of forgot and moved on. | | |
| ▲ | CharlieDigital 14 hours ago | parent [-] | | > Obama promised to do it
Do you know how the three branches of government work and who writes the laws?The legislative produced Frank-Dodd...which Trump and Republicans later scaled back... | | |
| ▲ | fragmede 12 hours ago | parent [-] | | Do we still have three separate branches? | | |
| ▲ | CharlieDigital 11 hours ago | parent [-] | | We sure did when Frank-Dodd was written by the legislative and then signed into law by the executive. GP's comment is about the aftermath of 2008, entirely missing the fact that the legislative did in fact create laws which were signed by the executive and then later, in 2018, dismantled under a different administration. It's a matter of simple facts here. | | |
| ▲ | badpun 10 hours ago | parent [-] | | Frank-Dodd wasn't nearly as strict as the post-1929 regulation (Glass-Steagall act) that actually prevented such crisies for half a century. | | |
| ▲ | CharlieDigital 8 hours ago | parent [-] | | Sure, but is that Obama's fault? See GP | | |
| ▲ | badpun 8 hours ago | parent [-] | | If it wasn't in his power to toughen regulation, why did he promise it in his campaign? | | |
| ▲ | CharlieDigital 4 hours ago | parent [-] | | So do you or do you not understand how the branches of government work? An executive's promise can only mean "I will sign the bill" because aside from executive orders, legal structures originate from the legislative. |
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| I mean people have been saying a crash is coming for years... Consumers recklessly purchased homes and cars at double their value, while relocating for remote work that was never long term in the eyes of their employer. Sounds like a receipt for disaster or a repeat of 2008- however, so much has changed since 2008... whatever happens, Black Swan! Hope "you" have your ducks in a row... As for AGI, lol. A box of matmuls isnt going to solve any real problems, so far, as you point out- is can barely write software. LLMs are basically gifted children. Smart sounding, lacking wisdom, chaotic, and likely just going to end up not that impressive. Either way- before we ever see AGI, we better get our heads out of the holes of the wealthy and enact UBI... |
