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
Some did – and some were allowed to fail. But there was going to be a huge systemic risk.
The vast majority of the bail out were in the form of emergency cash loans for which the government took shares and assets as collateral. The loans were, in fact, paid back to the government and the US government actually made a profit from the TARP (bailout) program. So the companies did have to pay for their rescue and the government came in as a rescuer of last resort (for a fee!).
Why would we want companies like car companies etc (who had nothing to do with the liquidity problem) to fail simply because their banks stopped working. If you allowed the banks to fail, you’d need to set up another bank all over again in order for the financial system to function. In the mean time, tens or hundreds of thousands of workers are left without pay or without a job until a new bank is formed. This ties up all that operational ability, business contracts, loans (consumer and business) loans in court hearings and liquidation processes for years.
It isn’t actually clear what, other than some odd sort of vengeance, good comes out of NOT doing the right thing by rescuing the economy. It is like having a neighbor you don’t like having a home fire and watching it as it burns and spreads to yours, then saying “good. we don’t want fire fighters. didn’t like that guy anyway”
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