What Legal Authority Does the Fed Need During a Financial Crisis?

[Ex-California]

I dislike the Obama Administration and loathe the Bush Administration, but they did splendidly saving our collective posteriors. The planetary, not just the United States' financial system, therefore everyone's economy was less than a day from systemic collapse. Perhaps just an afternoon. It would have been worse than the Great Depression. Caused by the too big too fail banks.

That's not hyperbole.

So what's the solution? And some people riding tumbrels would be nice.

Let them fail.

Forgive consumer debt, start over

[de officiis]

The planetary, not just the United States' financial system, therefore everyone's economy was less than a day from systemic collapse. Perhaps just an afternoon. It would have been worse than the Great Depression. Caused by the too big too fail banks. That's not hyperbole.

How do you know any of that?

Further reading

https://en.wikipedia.org/wiki/Financial ... ing_crisis

[SuburbanFarmer]

The planetary, not just the United States' financial system, therefore everyone's economy was less than a day from systemic collapse. Perhaps just an afternoon. It would have been worse than the Great Depression. Caused by the too big too fail banks. That's not hyperbole.

How do you know any of that?

Further reading

https://en.wikipedia.org/wiki/Financial ... ing_crisis

It's a valid point. Nobody knows what the actual fallout would have been. All we have is sheer panic used to prod the government into a bailout.

I suspect we would have just kept along and shrugged while the banks went under. Maybe a depression, but not the end of the world.

[jbird4049]

The planetary, not just the United States' financial system, therefore everyone's economy was less than a day from systemic collapse. Perhaps just an afternoon. It would have been worse than the Great Depression. Caused by the too big too fail banks. That's not hyperbole.

How do you know any of that?

Most of what I know is like 7-8 years old, but I did a lot of reading and listened to a lot of podcasts during and right after it. As I likely lost my job in part because of it, I had both time and motivation. NPR, Newshour, Frontline(?), Washington Post, and others.

Slightly(?) expanded explanation is that when Lehman Brothers was allowed to fail, that created uncertainty, and made financial organizations unwilling to just do the daily short term loans that companies often take out. That caused one of the large money market accounts to "break the buck" ( not pay back in full its unwritten guaranteed returns of anyone's principle. That and I believe Goldman Sachs sudden inability to play with the market, and derivatives,using such loans made its ability to pay its daily obligations impossible.

The company's leaders along with the leaders of other big finance corporations called the White House on Friday, and by Monday a plan to "solve" or at least prevent a complete freezing of world wide banking was created. During that time, all the heads of the big financial companies were called to meeting and given an offer that they couldn't refuse.

The panic arose because of derivatives like CDOs (Collateralize Debt Obligations) being used as both a means of making money, and as insurance against loss. Unfortunately, it became a large black market in which nobody could track who owed what to whom and when. In conventional old fashioned stocks, banking, and insurance there are rules and enforcement of them (often that is) but the derivatives aside from being financially bigger than everyone combined had no regulations because they were a new thing. Most people in business really are conservative when it comes to their money, and when they couldn't figure out what they owed, and who would be insolvent, if it something truly bad happened, they freaked. Our lives really are a matter of trust in others, theirs as well. A lack of confidence really was the big issue. The initial panic would have been on Wall Street, but because it involved all the big financial institutions there, and because they are linked very closely to the financial institutions in Europe, the Europeans would have panicked and frozen. Then Asia, and finally everyone else.


Of course, they were created in part to get around the regulations already in place. It was all legal of course, and a lot of the bonuses handed out depended on the profits made from them.

[jbird4049]

How do you know any of that?

Further reading

https://en.wikipedia.org/wiki/Financial ... ing_crisis

It's a valid point. Nobody knows what the actual fallout would have been. All we have is sheer panic used to prod the government into a bailout.

I suspect we would have just kept along and shrugged while the banks went under. Maybe a depression, but not the end of the world.

Part of the reason I became unemployed was this, and I have never really recovered. There would have been a lot of suffering.

It is interesting to note that the bonuses on Wall Street were not really affected at all. People crush the housing market, cause the Great Recession, and nearly tanked the planet's economy still get their yearly bonuses as usual. Yeah, using tumbrels sounds real nice.

[SuburbanFarmer]

Further reading

https://en.wikipedia.org/wiki/Financial ... ing_crisis

It's a valid point. Nobody knows what the actual fallout would have been. All we have is sheer panic used to prod the government into a bailout.

I suspect we would have just kept along and shrugged while the banks went under. Maybe a depression, but not the end of the world.

Part of the reason I became unemployed was this, and I have never really recovered. There would have been a lot of suffering.

It is interesting to note that the bonuses on Wall Street were not really affected at all. People crush the housing market, cause the Great Recession, and nearly tanked the planet's economy still get their yearly bonuses as usual. Yeah, using tumbrels sounds real nice.

Exactly. It appears from ground level, that nothing was prevented, other than a loss of profits for the banks. We still had near-record unemployment, property crashed, and our system was shaken.

I suspect it was the first plutocratic coup in world history.