Didn’t some of these companies cause the crash? Or at least help it. Feels kind of unfair that they get off scot-free.
What would have happened if the government didn’t bail them out? Would we ever recover?
In: Economics
In short, banks were bailed out because the entire financial system had very nearly collapsed. Had that played out without government sized intervention, the results would have been catastrophic.
Banks make money by lending out money that other people deposit with them. And most of the economy works because banks make it efficient to manage and use money. If banks suddenly disappeared, most of the economy would just stop. The bailouts were to prevent that.
Now there are tons of fascinating reasons for how and why this all happened. But they’re complex and elaborate. The best reason to think that that is exactly how it would play out is that it actually was happening. The situation was so dire that within days of the crisis starting, banks had largely stopped lending.
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