Michael Lewis On Why The Bank Bailout Was A Mistake

The Late Show with Stephen Colbert (12/10/2015)

CBS

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  1. rd commented on Dec 14

    I understood the logic in 2008-9 of bailing out the big financial institutions to prevent complete meltdown. The problem I had was the view by both Administrations that the individuals in the institutions were just as sacred as the institutions. the various stupid and criminal decisions were made by people, not institutions. the flat out refusal to even investigate to see if individuals should be removed from their positions and/or prosecuted is probably the most destabilizing part of the bailout.

    This apparent immunity is now leading to them lobbying for the rules to be changed even further to virtually eliminate any future potential for prosecution if another blow-up occurs. People who can take major risks in search of a massive payout with very little downside are an almost sure-fired way to lead to a bubble at some point. Socializing losses and privatizing gains is the antithesis of real capitalism.

    • Jojo commented on Dec 14

      Agreed. The public should be able to sue the executive branch to force them to prosecute.

      The Obama administrations refusal to prosecute Wall Street set a bad precedent that has emboldened white collar thievery throughout society.

      No segment of society should be protected from the law in a democratic society.

    • KDawg commented on Dec 14

      I partially agree. The bailouts, in some form or another, just had to be done. Ideally, we would have done the bailouts and then had tons of claw backs and criminal prosecutions.

      However, I’m not so sure it would be realistic to prosecute the higher ups responsible. What exact criminal charges would we charge them with? How many CEOs actually said, “Hey! Let’s commit fraud!” Everything was veiled in risk management strategies like credit default swaps in addition to simply taking mortgage brokers word for it. Hell, remember stated income loans? How do you prosecute an executive for that? It’s the borrower that technically committed the fraud!

      Yeah, they all knew this stuff was going on and looked the other way, but try to prove it beyond a reasonable doubt.

      We should have broken up the banks though. We still can. My only concern here is that we would either need to coordinate with other countries or severely limit foreign banks from doing business in the United States. Otherwise, foreign banks will just displace U.S. banks.

    • kenyc commented on Dec 14

      You should read Bernanke’s book about how and why they did what they did. To call the financial programs and bank injections a bailout is too simplistic; all the money lent to the banks were collateralized by bank assets and/or for preferred stock paying high dividends. The fed guided takeover of Bear Stearns and Merill Lynch effectively wiped out the shareholders of these two firms, and AIG was also similarly punished. At the end of the day the taxpayers got a pretty good return from their “bailout”.

      As far as criminal procedings, I believe they tried but proving intent versus incompetence is difficult to do. Everyone was sucked into this bubble; the buy side, the sell side, analysts, the media, regulators, etc. Perhaps they should go after the mortgage originators that doctored the loan documents more vigorously. At the end of the day greed took over everyone from the ceo’s all the way down to the schumcks that bought houses and took out home equity loans that they could not afford.

  2. theexpertisin commented on Dec 14

    Colbert.

    Used to be pithy. Now, predictable boring.

    • Jojo commented on Dec 14

      The few times I have watched Colbert on the new gig, he appears to have brought the format of the Colbert report to TLS. What worked on Comedy Central doesn’t always translate effectively to network TV.

  3. vonbahr commented on Dec 14

    rd is of course correct; absolutely right. However, acknowledging individual culpability would have led to individuals in small-town, moderate-sized city, and large urban centers ALSO being associated accomplices in the schemes. It was mortgage brokers in small, medium, and large business settings that fudged income statements (liar loans galore), failed to explain or point unqualified borrowers to lawyers for explication as to what they were or would be signing, et.al. Banks did what they have always done, especially the ultra-large ones, they took the paper and aggregated it and then re-sold it. Nothing new there IF the content had been properly and ethically weighed for accuracy. It would have been feasible to identify the supervisory sign-offs at whatever levels and prosecute them for malfeasance. One certain characteristic we have learned in 10,000 years of human society is that whether on the football field or boxing ring or business and commerce, humans need referees and umpires and when the kind of $ that was involved is of that magnitude, individuals have to be held accountable for the foul or in this instance, their errant behavior.

  4. louis commented on Dec 14

    What’s funny is how time makes it all so tame now.

    One word for what it really was – Treason.

  5. patfla commented on Dec 14

    Watched this then when it finished a suggestion was Steve Carell and watched that as well.

    Stephen Colbert is great and basically blah, blah, blah (genuflecting in the correct direction) but Cobert would be smarter yet if he’d just leave his guests a little more space.

    But then maybe that wouldn’t see as well …

    No one yet – and perhaps no one ever – will match Johnny Carson.

  6. CDizzle commented on Dec 15

    -Plenty of people knew it was going to pop.
    -Plenty of people knew, more or less, when it was going to pop.

    -Ethical, fiduciary-minded, executives do NOT end up leading trillion $ organizations, PERIOD.
    -In the words of Jimmy Malone, “and, THEN, what are you prepared to do?”

    -It’s always been this way.
    -It always will be…until right before the VERY end.

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