Price Tag of Too-Big-to-Fail Bailout Still Felt Ten Years Later
James Delingpole, of Breitbart, has an article, and a podcast, on what the cost of the 2008 bank bailouts actually was.
The too-big-to-fail 2008 bailout of the banks, in real terms, cost more than the Marshall Plan, the Louisiana Purchase, the Race to the Moon, the Savings and Loans crisis, the Korean War, the New Deal, the Invasion of Iraq, the Vietnam War, and NASA combined.
Get your head around that, if you can.
The taxpayers bailed out the banks, and some others, because they were too-big-to-fail, we were told. Why are they too-big-to-fail? Another question comes to mind: Why were they allowed to become too-big-to-fail?
If Apple were to suddenly collapse because the public decided to not buy their products anymore, would the taxpayer be expected to bail them out? It sounds slightly ridiculous to us mere mortals, but we bailed out those banks. And Chrysler and AIG and GM. Why? What makes them so special that they must be propped up at all costs, when they got into trouble through mismanagement? They took huge risks and lost. Did they pay any real penalties as a result? No. They were let off the hook, at taxpayer expense, and continue taking huge risks. They no doubt expect they no doubt expect to be protected once again.
Has anything been solved by the bailouts? No. The banks continue to be big risk takers, and are basically insolvent. The day of reckoning has merely been pushed off.
What can be done about it? For one, the big banks need to be broken up so they are no longer too-big-to-fail. If they are not too-big-to-fail, then if they take big risks, and fail, the bank as a whole can fail, and those banks that take sensible risks will survive. That is what happens in free markets. In the Crony Capitalist model, the bad banks are bailed out. They are propped up for the benefit of those who took the bad risks at the expense of the taxpayer.
An alternative course is to prevent any bailouts. Of course, if the too-big-to-fail banks fail, the repercussions will be large. A systemic collapse becomes more likely. The pain will be more severe and more widespread, which is what the bailouts prevented, or so we are told.
Nothing has changed, since the 2008 crisis. The banks are still too-big-to-fail, and they are still taking huge risks. Meanwhile, the taxpayers are on the hook for the enormous costs of the bailouts. This is America in 2018.