Will bailouts become more frequent?

[StonksStonksStonks]

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?

[1715442111]

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[jackg]

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.

[figmentofmyass]

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

2008 brought lots of market consolidation---USA giants like washington mutual, merrill lynch, and bear stearns were absorbed by the biggest banks, jpmorgan chase and bank of america. if a crisis hits, they'll get TARP-like bailouts while acquiring failing banks IMO, further consolidating the industry.

citibank actually did get partially nationalized after that crisis. i assume the government will sell their stake ASAP (like they did with citi in 2010) but i guess things could play out differently if the banks don't return to profitability.

[audaciousbeing]

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.

[jackg]

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

2008 brought lots of market consolidation---USA giants like washington mutual, merrill lynch, and bear stearns were absorbed by the biggest banks, jpmorgan chase and bank of america. if a crisis hits, they'll get TARP-like bailouts while acquiring failing banks IMO, further consolidating the industry.

citibank actually did get partially nationalized after that crisis. i assume the government will sell their stake ASAP (like they did with citi in 2010) but i guess things could play out differently if the banks don't return to profitability.

I could see it being run as a committee type system where the best people that apply are put in charge of running it but then ultimate decision lies with the government - and shares aren't distributed (this might be how bulling societies were meant to work)?

That succession of smaller banks being absorbed by bigger ones, can't end well imo. You're going to end up with too much market dominance.

[jaysabi]

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?

Three data points is hardly enough data to make a point, let alone extrapolate it into anything meaningful.  Bailouts are generally bad because they take the consequences for irresponsible behavior out of the equation.  They also skew the economics of investment and risk/reward.  The people who want bailouts are those who have a lot to lose, so bailouts invariably favor the richest people in the economy while destabilizing the currency for the rest of us.  Bailouts should be a measure of last resort, but "too big to fail" is now a permanent part of our lexicon to the detriment of us all (except the billionaire class).

[cryptoboss2020]

i think 2030 next bail out  

 ....   or war lol  

[bits4books]

Or maybe we're just not going to save anyone next time? Why if no one appreciates it? And why if then there will still be a crash? Let it take its course and just see what happens in the end. Maybe this is the Golden path that we all need?

[davis196]

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.

[Mauser]

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. The problem is that demand and consumption dropped in the real economy. People are losing their jobs and have less money to spend, the ones that still have a job and get a regular paycheck rather save then spend their money. Didn't most banks in 2008 paid back there bailout money? I think the government even made profits on some of the loans.

[exstasie]

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.

[The Sceptical Chymist]

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.

[sheenshane]

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.

[mu_enrico]

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.

[btc_angela]

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.

[Yatsan]

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.

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.

[jaysabi]

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.

[exstasie]

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.

[dondonk]

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.

[Jating]

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.