Will bailouts become more frequent? - page 2.

exstasie

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Quote from: ChiBitCTy on September 04, 2020, 07:12:59 AM

The U.S. government has already showed it's too inept to run businesses ( US postal service for example ).

Apples and oranges, that.

The USPS is run as a government service, not a private for-profit business. They keep mail delivery affordable as a service to residents. This is completely different than the government loaning and taking a stake in a for-profit business and then selling their stake ASAP. The government profited from the TARP bailout loans in 2008.

The USPS's situation is also rather unfair and not comparable to any other government agency. No other government agency has ever been forced to do this:

Quote

In 2006, Congress passed a law to require the USPS to prefund 75 years worth of retiree health benefits in the span of ten years—a cost of approximately $110 billion. Although the money is intended to be set aside for future Post Office retirees, the funds are instead being diverted to help pay down the national debt.

https://defazio.house.gov/media-center/press-releases/defazio-authored-bill-to-help-us-postal-service-maintain-sustainability

As it turns out, 2006 was the last year the Post Office broke even:

Quote

The Postal Service hasn’t broken even since 2006 and has racked up $160.9 billion in debt. The bulk of that, $119.3 billion, stems from its annual obligation to prepay retiree health benefits, according to the Government Accountability Office.

https://www.washingtonpost.com/business/2020/06/25/postal-service-packages-coronavirus/

It shouldn't come as a surprise they are now bankrupt.

ChiBitCTy

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It's interesting to see that during my lifetime I've seen of the three big bailouts in the United States history, not that that is something I am proud of , but an interesting point in history to be living in. I think depending on the type of bailout, or how the bailout is set up, determines if it is a good idea for a country or a bad idea. Personally I think it's a good idea when the bailout does have strings attached, i.e. "you take this bailout, and we will become part owners of the company going forward". The U.S. government has already showed it's too inept to run businesses ( US postal service for example ).

beerlover

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It would be very sad for the world economy that bailouts became more frequent already.

If you ask me the best thing about the current situation of our economy is the fact that rich can't get any more richer, they can try but the more they try the more economy will fail, there is a limited amount of wealth that you can have and after that there are no more customers and when those wealthy people do not have customers they will get poorer and poorer.

Do you know why people like Jeff Bezos and Mark Zuckerberg and Bill Gates are top people? Jeff sells cheap stuff to you and sends directly to home versus going to a shop and buying for more expensive, Mark doesn't charge the user anything and Bill has almost all the computer market, so at the end of the day we are talking about some wealthy people who are not a "must" product creators getting lesser and lesser money.

jambul_kribo

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Quote from: StonksStonksStonks on August 25, 2020, 11:35:59 AM

1989 - savings and loans bailout
2008 - banks bailout
2020 - covid19 bailout aka wall street bailout

bailouts get bigger every time. But will they become more frequent?? Do we need more bailouts to bailout the aftermath of the previous bailouts?

if in future we see condition like at this moment or even better i see bailout still be the solution. we will face difficult condition in future, not only economic condition but nature condition which is not balance again . bailout in the past due economy case, and now due virus pandemic and maybe if happen again caused by nature disaster, but deeply i am not hoping bailout will not happen again.

el kaka22

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I feel like this 12 year difference should be disregarded while also realizing that it was needed. It should be disregarded because this is a global pandemic that actually went better than 2008. Think about it, there were maybe couple thousand at most wall street people who got too greedy and they insanely leveraged house mortgages because they thought every single house mortgage will be paid no matter what (which was a lie, some people failed and got their houses seized) and because of those few bankers, the whole world got upside down and everything sucked for years.

Now we had a pandemic that literally stopped the whole worlds economy for few months, but we are back on earth again and things do not look like it was as bad as back in 2008 if you ask me, which is a good thing.

wack slacker

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The bailout packages will be more frequent than for sure. Currently, businesses and people tend to borrow to maintain their business and reinvest. They have a habit of borrowing and they will continue to borrow. If diseases and natural disasters become more prevalent in the face of climate change, further relief packages will continue to be rolled out.

fiulpro

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Quote from: StonksStonksStonks on August 25, 2020, 11:35:59 AM

1989 - savings and loans bailout
2008 - banks bailout
2020 - covid19 bailout aka wall street bailout

bailouts get bigger every time. But will they become more frequent?? Do we need more bailouts to bailout the aftermath of the previous bailouts?

See bailouts only happen when there is very unforeseen circumstances plus the problem cannot be solved in any way. I don't think they will become much frequent since, now we have an idea of what we are into and therefore it can be controlled, the government is asking banks to issue time for the people who have to work towards their company's financial situation. Stimulus bills are now being distributed, I do think we won't see them so frequently.

Plus I do think the government controlled banks can print as much money as they want but they are just pushing the balloon to its boundary, soon enough the value of the currency of that particular country will go down which would cause the whole economy to die from the inside.

Right now we need to focus on the new normal. How these things can be prevented and how these situations can be changed.

gbrendeh

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Bailout will continue as long we have unforeseen circumstances that altered the economy of a nation or continent but the frequency is not something that easy to determine.

jackg

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Quote from: so98nn on August 29, 2020, 02:13:19 PM

Quote from: jackg on August 25, 2020, 11:38:23 AM

With every bailout imo strengthens the control the government have on the banks and other institutions and heightens regulations.

I think we will soon just start to see government ownership of financial institutions instead.

I hope all the institutes won't go under government rule since it will create huge chaos in terms of how they run it. At least in the private sector you get few demands fulfilled because these private banks needs actual "business" and they don't have big fat wallets to fullfil any worsening condition around them. They serve the customers like a God, otherwise they might run out business.

Govt controlled banks are just treated as safety deposits, since they do not run out of business "virtually" and provide security of lifetime funds.

With every bailout comes a new set of protocols banks have to follow. Notice I said "government control" and not "government dictation" there are schemes the government could put in place similar to how the rail networks in Wales and London work with a similar structure to now but without private shareholders. In the best case they could run it a bit like some more charitable companies are run and have someone's share of a vote equivelant to the amount of profit they've brought the company (either by savings or lending) - you'd still pay your ceos and your staff a competitive rate but the onus is on the collective to make it run.

so98nn

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Quote from: jackg on August 25, 2020, 11:38:23 AM

With every bailout imo strengthens the control the government have on the banks and other institutions and heightens regulations.

I think we will soon just start to see government ownership of financial institutions instead.

I hope all the institutes won't go under government rule since it will create huge chaos in terms of how they run it. At least in the private sector you get few demands fulfilled because these private banks needs actual "business" and they don't have big fat wallets to fullfil any worsening condition around them. They serve the customers like a God, otherwise they might run out business.

Govt controlled banks are just treated as safety deposits, since they do not run out of business "virtually" and provide security of lifetime funds.

Jating

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I guess it all depends on what industries are the government going to rescue through this bailouts. And agree with @exstasie, government are going to simply pick in the last bailout it was the banks and later the automobile industry if I'm not mistaken. So what will be the case in this years bailout? Is there something different? Or should the bailouts goes directly to one sector or should it be to the people (which obviously is what the US government with their stimulus package).

How about the airline industries, do you think it needed help at this point? or the US will just stick to the banks as they have been doing for years.

dondonk

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We can't be sure we need a bailout after this, because we can't predict what will happen in the future. in this case a bailout could occur because there were unexpected events such as the Covid 19 pandemic. The hope is that in the future everything will be resolved so that no more bailout is needed. or at least it doesn't happen frequently.

exstasie

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Quote from: mu_enrico on August 27, 2020, 11:49:27 PM

The "myth" is that the US experiences an economic crisis every ten years. So the next bailout event would be around ten years from now. As long as the "too big to fail" thing still exists, there will be bailouts at every economic crisis.

Absolutely. And those bailouts mean the government picking winners and losers. They bail out some companies, while forcing others into receivership and mergers with the chosen winners. We saw it in 2008 with the banks. For instance, JP Morgan pocketed huge TARP bailout funds and huge loans from the Fed so it could swallow up competitors like Wamu (biggest savings and loan in the country at the time) among others.

These types of moves reinforce a cartel dynamic where markets are controlled by increasingly few but extremely powerful companies. It's all very insidious, especially because this dynamic makes "too big to fail" companies bigger and bigger over time.

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Quote from: davis196 on August 27, 2020, 01:50:05 AM

Quote from: StonksStonksStonks on August 25, 2020, 11:35:59 AM

1989 - savings and loans bailout
2008 - banks bailout
2020 - covid19 bailout aka wall street bailout

bailouts get bigger every time. But will they become more frequent?? Do we need more bailouts to bailout the aftermath of the previous bailouts?

When the economy is growing the companies are whining about government regulations and taxes.
When the economy is in a recession/depression all the companies want the government to save them.
That's the hypocrisy of capitalism right there.
After several decades,the US economy will reach a point,where the companies will not be able to exist without constant bailouts.
This will be a government controlled economy,pretty similar to the communist centralized plan economy.

Lol, that's not "capitalism". In a capitalist system, bad companies that haven't planned for adverse situations are allowed to go bankrupt. Bailouts are anti-capitalist. What you're actually describing is just greed, and it doesn't exist solely in capitalism. Greed is human nature, and no matter what economic system you have, greed is the motivating factor for it. That's why in even "socialist" economic systems, wealth concentrates at the top. The rulers of those systems are motivated by greed.

There's a middle ground too, it's not just capitalism or communism. Countries like Sweden have a pretty solid system where the economy is not centrally planned but there are strong social programs.

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Quote from: audaciousbeing on August 25, 2020, 01:40:05 PM

Bailout will continue to happen as long as the conditions at the moment demands it. In 2008 during the recession a lot of families would have been further thrown into agony with government offering the bailout. In the current pandemic, without government intervention to families and the economy as a whole, there would be massive poverty in the land with companies out of business which further tank economic indices, any reasonable government needs to do everything needed for restoration.

Certainly that would be the reality. As long as there is in need or a demand calling for the concerns of having bailout to save up businesses for the benefit of the good, this will frequently came out to be a necessity that is needed to support the restoration. The frequency on how bailouts came will depend on the economic situation which will result on how much is the needed bailout to be spent to resolve the financial crisis. At this time of pandemic, it becomes more tragic and have bring out a very large scale of economic deflation that calls out for the need to spend a very large amount of bailouts.

Quote from: btc_angela on August 28, 2020, 06:31:31 AM

Quote from: mu_enrico on August 27, 2020, 11:49:27 PM

The "myth" is that the US experiences an economic crisis every ten years. So the next bailout event would be around ten years from now. As long as the "too big to fail" thing still exists, there will be bailouts at every economic crisis.

And they can just justify bailouts as it already set a precedence. And the "more the better", and 'there's not much danger" attitude from US. And its obvious that the meltdown today is far greater than 2008-09, specially the unemployment rate. So in the next ten years, and if we are going to see another bail out, it will be bigger than we have seen today. And we don't know how much it is going to cost, trillion dollars at least.

Let's just all see what will happen after 10 years if the "myth" would be cut down that the US was always experiencing an economic crisis that is calling for bailouts. Hope to see no further damage in the economy that is very costly that in need to spend millions and trillions to support the needy.

btc_angela

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Quote from: mu_enrico on August 27, 2020, 11:49:27 PM

The "myth" is that the US experiences an economic crisis every ten years. So the next bailout event would be around ten years from now. As long as the "too big to fail" thing still exists, there will be bailouts at every economic crisis.

And they can just justify bailouts as it already set a precedence. And the "more the better", and 'there's not much danger" attitude from US. And its obvious that the meltdown today is far greater than 2008-09, specially the unemployment rate. So in the next ten years, and if we are going to see another bail out, it will be bigger than we have seen today. And we don't know how much it is going to cost, trillion dollars at least.

mu_enrico

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The "myth" is that the US experiences an economic crisis every ten years. So the next bailout event would be around ten years from now. As long as the "too big to fail" thing still exists, there will be bailouts at every economic crisis.

sheenshane

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Quote from: jackg on August 25, 2020, 11:38:23 AM

I think we will soon just start to see government ownership of financial institutions instead.

IMO, the government depends on the source that is circulating in a certain time, monthly or annually based on the nations economic growth, but when you say about ownership it only is available in a communist country, Instead of owning a financial Institution it is also a part of the government to take action by helping that specific institution to grow and produce. The government should bail out the businesses that are the bloodline of their economy.

The Sceptical Chymist

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Related to OP's list is Long Term Capital Management in 1998, which almost caused a huge financial disaster but has been pretty much forgotten about today. The US government didn't bail them out, but a consortium of banks did--and I'm sure if those banks hadn't been willing or able to, the taxpayers would have come to the rescue.

Then there was the bailout of GM under the TARP program in 2009.

But the question is whether bailouts are going to become more frequent, and I don't think anyone has the answer to that. You'd think that after each financial meltdown, Wall Street and the government regulators would learn some lessons, but they apparently don't. So if I had to take a guess, I'd say they might not become more frequent but they're still going to keep happening. Moral hazard. It's something the government really needs to learn about and should let the concept drive its actions.

exstasie

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Quote from: Mauser on August 27, 2020, 03:37:25 AM

Quote from: StonksStonksStonks on August 25, 2020, 11:35:59 AM

1989 - savings and loans bailout
2008 - banks bailout
2020 - covid19 bailout aka wall street bailout

bailouts get bigger every time. But will they become more frequent?? Do we need more bailouts to bailout the aftermath of the previous bailouts?

I don't think the banks are the problem at the moment. Bailing out Wall street again at the moment doesn't seem very likely. We probably will see more support for real economy rather than for financial services.

For now. Banks were well capitalized heading into this. Staying that way is dependent on mortgagees (including landlords, who are dependent on rent being paid) staying solvent. This is why it was so important to immediately bail out homeowners with expanded forbearance and deferral options. I can't figure out exactly how these programs are being funded. Most likely the government is or will be taking on toxic mortgage assets from the banks, when all is said and done.

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