The US Treasury said Wednesday the government’s massive response to the economic crisis five years ago paid off, avoiding a catastrophic breakdown of the financial system.
In a report marking the anniversary of the bankruptcy of investment bank Lehman Brothers — which snowballed into the worst crisis since the 1930s — the Treasury defended deploying hundreds of billions of taxpayer dollars to save other banks, major financial institutions and auto companies.
“Without the government’s forceful response, that damage would have been far worse, and the ultimate cost to repair the damage would have been far higher,” the report summarized.The Raw Story
While the rescue effort required piling up government debt, it was necessary, said Treasury officials who briefed reporters.
“We prevented a collapse of the financial system,” one said on condition of anonymity.
Massive $238 billion financial bailout 5 years ago ‘avoided catastrophe,’ but only $3 billion has been paid back: Treasury
Agence Presse-France
1 comment:
There is a simple explanation for this nonsense and an equally simple solution.
The nonsense is that we allow institutions called “banks” to, 1, accept deposits, 2, promise to return those deposits, while 3, investing the money in less than 100% safe manner. Ergo when the value of the investments or loans falls below the value of the deposits, the bank is bust.
There are two very simple rules that solve the problem. Rule No1: any bank creditor who wants their money investing or lending on carries the risk: i.e. becomes a quasi-shareholder. That way, bank insolvency is plain impossible.
Rule No2: where depositors want $X back for every $X deposited, their money CANNOT BE invested or loaned on. That way their money is safe.
Problem solved.
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