Bailing them out does not mean bailing them out with zero consequences. Regulators have a lot of levers to pull there and should have used that. Splitting them up, taking them over outright, strengthening postal banking, loan forgiveness, banning instruments, they could have easily used the chance to negotiate the banks into making painful compromises that would have greatly benefited society. But they didn't and just gave them free money instead.
Or they could have just not bailed them out. Just because the finance guys way they are the most important thing in the world doesn’t mean we have to believe them.
I don’t disagree - I think Lehman Brothers was a great example that you can have a giant bank go under. The productive assets of Lehman were back at work within six months and the value destroying units disappeared. I think had the Fed/Treasury let Bear Stearns go bankrupt instead of making JPMC swallow them (same for BofA and Merrill Lynch) it might have ripped the band aid off, rather than dragging it out.
But importantly — bailing out the banks isn’t really bailing out the banks, it’s bailing out the banks’ creditors.
I totally agree with you, however when society at large is built on the back of such a belief, you can't just pull it out from under everyone overnight without major collateral damage.
Those are all possible but they would have hurt the US financial dominance on the world stage. A lot of those decisions are ultimately based on imperial goals, not on the wellbeing of the citizenry (in the near term anyway, I'm pretty sure the people making those decisions believe they are thinking long-term.)
They didn't want the US banks to be bought out by Asian or European interests.
