{"id":37872,"date":"2018-09-17T05:41:25","date_gmt":"2018-09-17T10:41:25","guid":{"rendered":"http:\/\/olduvai.ca\/?p=37872"},"modified":"2018-09-17T05:41:35","modified_gmt":"2018-09-17T10:41:35","slug":"37872","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=37872","title":{"rendered":"The Bank Bailout of 2008 was Unnecessa"},"content":{"rendered":"

The Bank Bailout of 2008 was Unnecessary<\/a><\/h3>\n

\"\"<\/h3>\n
\n
\n

Photo Source Xavier | CC BY 2.0<\/a><\/p>\n<\/div>\n

This week marked 10 years since the harrowing descent into the financial crisis \u2014 when the huge investment bank Lehman Bros. went into bankruptcy, with the country\u2019s largest insurer, AIG, about to follow. No one was sure which financial institution might be next to fall.<\/p>\n

The banking system started to freeze up. Banks typically extend short-term credit to one another for a few hundredths of a percentage point more than the cost of borrowing from the federal government. This gap exploded to 4 or 5 percentage points after Lehman collapsed. Federal Reserve Chair Ben Bernanke \u2014 along with Treasury Secretary Henry Paulson and Federal Reserve Bank of New York President Timothy Geithner \u2014 rushed to Congress to get $700 billion to bail out the banks. \u201cIf we don\u2019t do this today we won\u2019t have an economy on Monday,\u201d is the line famously attributed to Bernanke.<\/p>\n

The trio argued to lawmakers that without the bailout, the United States faced a catastrophic collapse of the financial system and a second Great Depression.<\/p>\n

Neither part of that story was true.<\/p>\n

Still, news reports on the crisis raised the prospect of empty ATMs and checks uncashed. There were stories in major media outlets about the bank runs of 1929.<\/p>\n

No such scenario was in the cards in 2008. Unlike 1929, we have the Federal Deposit Insurance Corporation. The FDIC was created precisely to prevent the sort of bank runs that were common during the Great Depression and earlier financial panics. The FDIC is very good at taking over a failed bank to ensure that checks are honored and ATMs keep working. In fact, the FDIC took over several major banks and many minor ones during the Great Recession. Business carried on as normal and most customers \u2014 unless they were following the news closely \u2014 remained unaware.<\/p>\n

\u2026click on the above link to read the rest of the article\u2026<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

The Bank Bailout of 2008 was Unnecessary Photo Source Xavier | CC BY 2.0 This week marked 10 years since the harrowing descent into the financial crisis \u2014 when the huge investment bank Lehman Bros. went into bankruptcy, with the country\u2019s largest insurer, AIG, about to follow. No one was sure which financial institution might […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[8,9045,2809,10724,1361,63,68,5493,19338,303,8222,20921,5415,21596,3650],"class_list":["post-37872","post","type-post","status-publish","format-standard","hentry","category-economics","tag-8","tag-aig","tag-bailouts","tag-bank-bailouts","tag-bankruptcy","tag-banks","tag-ben-bernanke","tag-counterpunch","tag-dean-baker","tag-fed","tag-great-financial-crisis","tag-henry-paulson","tag-lehman-brothers","tag-timothy-geithner","tag-us-federal-reserve"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/37872","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=37872"}],"version-history":[{"count":2,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/37872\/revisions"}],"predecessor-version":[{"id":37874,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/37872\/revisions\/37874"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=37872"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=37872"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=37872"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}