There are also repercussions for the bank managers who drove their businesses to the edge of a cliff. But it’s also possible it won’t amount to enough to make a difference.

It’s possible that cost will filter down to bank customers through higher fees, as Republicans claim. The money covering depositors above $250,000 is coming from the insurance pool that covers banks, which banks fund by paying premiums. Biden is right when he says no taxpayer money is going toward the bailouts-so far. B-A-I-L-O-U-T.īut the Biden team may very well execute the 2023 bailouts in ways that make them more palatable than the 2008 rescues. They’re definitely bailouts, by any plausible definition, no matter what Biden says: The government is choosing to intervene in private-sector business and prevent losses, even though it’s not obligated to do that. That wasn’t directly related to the bailouts, but on the whole it left the impression that Washington was way too cozy with Wall Street, at the expense of ordinary folks.īiden is now battling the impression that the bank rescues of 2023 are a repeat in miniature of the 2008 bailouts. Finally, there were hardly any prosecutions for fraud or any other criminal activity after the 2008 crash. and other agencies involved in the bailouts drew criticism for opaque reporting that raised questions about who, exactly, was getting bailout money. There were also “ backdoor bailouts” that allowed floundering firms such as insurance giant AIG to pay back trading partners such as Goldman Sachs at 100%, when those counterparties should have taken losses commensurate with their own lousy risk assessment. One outrage was bailed-out banks paying fat bonuses to executives in the midst of a grueling recession, including some who led their firms into the abyss and were arguably responsible for the crisis in the first place. In general, it didn’t put enough restrictions on banks that took bailout money. Still, the government made some mistakes. The biggest loss to taxpayers came not from any bank bailout but from General Motors, which took $51 billion in government aid yet declared bankruptcy anyway, leaving $11.3 billion unpaid. ProPublica tracked all the bailouts from the financial crisis and says the government has so far earned a net profit of $109 profit from TARP, plus the separate bailouts of mortgage agencies Fannie Mae and Freddie Mac. says the lifetime cost of TARP was only $32 billion, spread over many years. The government charged interest on the money it doled out, and many banks repaid more than they took. It only took about half of that money to stabilize the financial system. Since TARP did require taxpayer money, Congress had to pass a law authorizing up to $700 billion in spending. The main element of those bailouts was the Troubled Assets Relief Program, or TARP, which involved direct infusions of cash into hundreds of banks, to keep them solvent. The Biden team now has a chance to apply some of the lessons learned from 2008.

The Biden bailouts, though much smaller, seem to be having a similar effect, given that deposit outflows at other regional banks under financial stress have abated, given the regulators’ signal that they plan to back all deposits. The gargantuan 2008 bailouts were deeply unpopular, ever though economists broadly agree that they prevented a depression that might have persisted to this day. REUTERS/Brittany Hosea-Small (Brittany Hosea-Small / reuters) FDIC representatives Luis Mayorga and Igor Fayermark speak with customers outside of the Silicon Valley Bank headquarters in Santa Clara, California, U.S.

Once in a lifetime mortgage bailout