I think two books on this subject are extremely informative. One is _Stress Test_ by Timothy Geithner, the other is _The end of Alchemy_ by Mervyn King.

Both have to do with the policies discussed in this article and the Lender of Last Resort (LOLR) policies implicit in the role of central banks.

You are describing the Moral Hazard risks that Geithner mostly dismisses as irrelevant in the moment, and which King believes needs to be removed from the system entirely. The combination of the two works gives a lot to think about.

> government will bail out big banks

I really think the fabric of the USA economic system was changed with the decisions made during the 2008 financial crisis. Many citizens felt the game was rigged; large corporations held undue influence in the federal government. 2008 proved the USA has transitioned to corporate capitalism.

It is still stupefying how a country based on capitalism wouldn't allow the tenets of capitalism to play out.

Well, if you're taking about TARP, the big banks paid everything back with interest, so the government has even made some profit from this bailout.

This is a classic example of using the truth to tell a lie.

The banks did repay their loans, this is true.

They also got to take HUGE risks without having to bear the risk, yet they got to capture the entire reward.

The government didn't charge the big banks a multi-trillion dollar tax for taking on the risk of doing TARP.

But this is also not entirely true. Banks did not know they were taking a huge risk. They did not understand how leveraged they actually were because securitized mortgages were being misrepresented by credit rating agencies[0].

The entire purpose of TARP was to prevent a depression. It was meant to be a stopgap.

[0] https://en.wikipedia.org/wiki/Credit_rating_agencies_and_the...

What about the home owners? No one bailed them out. Its always privatize the profits and socialize the losses.

This is by design:

https://nowthisnews.com/videos/politics/jennifer-lawrence-is...

https://represent.us/

Federal elected officials spend 70% of their time now fundraising, so they only listen to their donors. And their donors are billionaires and large institutions.

So there is no statistical correlation now between an issue's popularity and whether it gets passed into law (voters have been disenfranchised).

Meaning the next bailout will happen exactly the same as the last one, unless left-right coalitions and other organizations work to end corruption at the local grassroots level and work their way up to state and federal.

There were (and still are) homeowners assist programs: https://en.m.wikipedia.org/wiki/Making_Home_Affordable

Or by "bailout" you mean something different?

Would the homeowners have paid back the bailout money with interest?

The main point being made, I think, is that the government's job isn't to choose the winners and losers in the market.

There's no way the government can avoid doing that. The job of any regulator is to choose winners and losers, to keep things balanced.

The problem is that in this case, the government chose to bail out the giant entities that caused the problem, and totally ignore the individual citizens who were really harmed by it.

But doesn't the government have a responsibility to help ensure jobs are available to it's citizens? That there is a food supply that is stable and won't collapse with disruptions? That you have the industry to make tanks and planes in the event of a war? Turning everything over to the free market is not a stable solution.

but in this case government makes sure that there are no losers at least in banking system.

The interest rate on TARP loans was well below market, so even though the banks did pay some interest it was still a sweetheart deal.

Anyways, TARP was dwarfed by Quantitative Easing. The FED printed around $1.8 trillion to buy distressed assets from banks. To this day the FED still holds some $1.7 trillion in mortgage backed securities on its books.

Certainly, why would anyone want to be anything else in life other than a banker? No matter what happens, or what mistakes you make you'll get bailed out. Safest and most lucrative job in the world.

Uhhh, did you forget the only reason they did that was so Washington wouldn't restrict their executive handouts? They wanted to pay their brass and the government started giving them a hard time.

If they could have cashed those checks, paid executive bonuses, AND not paid back their loan; they wouldn't have.