Bailout complaints

[izmirian]

Although I have some complaints about the proposed bailout package, I'm starting to have more complaints about the media complaining about the bailout package. No one seems to bring up the point that the government is already on the hook for billions of dollars if banks go under (through the FDIC insurance program and similar programs for credit

Comments

[jenlemus]

I agree, the press has done an awful job at covering this. They've not really questioned the plan much, or really done a good job in describing how we got here

[izmirian]

It's a good point that some of the risk for the debt has been passed on from the banks to the insurers. Though like you say, given the amount of bad debt that is rumored to be out there, the insurers might go bankrupt pretty quickly, leaving the banks without further insurance. Then the banks would go bankrupt and the government would take them over, bailing out the consumers.

[jenlemus]

That's the problem. The banks *are* the insurers, for the most part. They'd very craftily had a law written to prevent this kind of financial instrument from being defined as insurance, so they could make money off of it.

That's why Lehman Brothers was allowed to fail, but AIG and Bear Stearns were not. A small subsidarary of AIG classified as a bank caused the entire insurance giant to fail.

http://www.nytimes.com/2008/09/28/business/28melt.html?ex=1380340800&en=39f686dd31af8cbd&ei=5124&partner=permalink&exprod=permalink

[bakedweasels]

I'd say BS was saved because Treasury and the Fed thought it would be a one-off. Lehman was allowed to fail because they'd passed up too many chances to sell themselves.

And AIG was saved b/c Goldman had too much exposure to them.

[twe]

You might find better coverage in the Economist than in the mainstream US media.

[kirisutogomen]

You could probably write a little Javascript to post that in everything anyone ever says. It would always be true, unless the subject were Britney Spears.