Comments
Comment by g:
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You’re missing at least one more zero…
To answer your question “Finally, what will the legislators do to ensure their citizens don’t have to foot the same bill again next year? Surely, the bonuses of bank crooks are more a cosmetic problem in this context. ” Nothing will be guaranteed. This has happened before, admittedly on a smaller scale, and it will happen again.
I also find this confusing. Are the people running the world really that horrible? That stupid?
Clever. Horrible. Quite talented, because they make a boat load of cash and their defunct companies get to be saved, whilst the “little people” foot the bill. After the fact, they sit with their proceeds or stare at their humongous bank balances on their Macbook Pros, ensconced in walled off compounds guarded by private security firms. They are the elite, after all.
Comment by dan:
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Not being a yank I shouldn’t really comment, but how can a country like the US not afford a public healthcare or welfare system but can rustle $700 billion out of nowhere for poor impoverished bankers?
Comment by LKM:
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People understand how the financial system works, but they can’t predict what it will do because it all comes down to human behavior. Every bank could go bankrupt within hours if a sizable portion of its customers decided to get their savings out while they still can; so even a mere rumor could potentially cause a huge, self-perpetuating financial crisis. These things can’t be predicted reliably.
That is not to say that there were no signs of the current crisis. This one did not happen by accident, it was a long time coming, and I find it sad that the US will bail outs its banks, but not help the people who had their homes foreclosed.
Comment by ssp:
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@g:
I start thinking I’m in the wrong business. I don’t know much about the economy and I have an endless source of cynicism. I should make a perfect banker… I might have been able to retire after this wonderful year.
It still strikes me as odd how politicians can now pretend they are able to uderstand or even ‘fix’ the situation.
I can’t make a coherent point about this yet, but somehow the abstraction is scary. I mean I love abstraction in areas like logic or maths where the is no relation to the ‘real world’. But in the monkey business they create all these ‘abstract’ ideas which disjoin what they are doing from reality. In a way it looks more like obfuscation and crookery than anything useful. And – unlike in mathematics – the extra ‘abstraction’ seems to prevent people from understanding what’s going on rather than enabling them to understand things.
The irony is that the U.S. (and world) economy is still as productive, energetic and clever as it was a few weeks ago. And yet, the banks are scared shitless now and want to make everybody’s life difficult rather than doing their job. As a consequence it sounds (I wouldn’t say it feels – at least not here and not now) like this is a huge disaster while not much changed in the material world. It’s mainly some bits which changed in some computers. ⌘-Z.
@dan:
I suppose it’s about priorities. Having poor people die doesn’t lose elections, having the economy go down the drain does. Because that gives ugly numbers and scaremongering. Yay for democracy!
@LKM:
I see how this can happen to a single bank. Which may be in part because their behaviour was too risky (lending out too much money). But I think we agree that one gets the impression that the problem at hand is slightly bigger and comes from some pipe dream and imaginary deals just stopping to work. People didn’t really run to the banks to grab their cash.
Arguably that’s just ‘human behaviour’ because even bankers are human (whether they like it or not), but I’d still consider it a structural problem rather than random misfortune. And even if the American taxpayers can stomach that amount, the question remains how similar situations can be prevented in the future. Otherwise rather profitable businesses will appear in the ‘banking crisis’ sector. (I guess they already have.)
Comment by LKM:
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Which may be in part because their behaviour was too risky
No bank has enough money to pay out even a small percentage of the money its customers gave it. Banks are risky by definition, and they only work as long as we don’t doubt that they work :-)
People didn’t really run to the banks to grab their cash.
They’re starting to. It’s part of what killed Washington Mutual.
I’d still consider it a structural problem
Of course it is. The fact that random acts can lead to huge crises absolutely is a structural problem.
the question remains how similar situations can be prevented in the future
They really can’t. The probability of them occurring can be decreased, but these types of issues are an integral part of how our monetary and banking system works.
