Why is this always presented as a binary decision? So I think we are broadly on the same page - judging from the rest of your para. But I take issue with the idea that we needed to bail out banks with no strings attached access to vast federal funds and the Fed window. Why not attach strings?
Why were senior management not forced out? Why were they not forced to lose deferred compensation? Why werent equity stakes taken to dilute existing holders and the banks “rehabed” and then refloated? Why were MS and GS allowed to switch status to bank holding companies and given immediate access to the Fed window without senior management being forced to leave?
None of this made sense and there is no precedent for it. A giant public sector give-away done at non-market prices for no reason other than to make sure that rich failures would stay rich.
And the ultimate cost of it is the de-legitimization of US capitalism itself. The central element of US capitalism - the groups given custody of the currency - ie the right to “magic” money into existence, were bailed out on preferential terms at the expense of the public after they had totally destroyed the financial system through incompetence and greed. As if they didn’t have enough privileges already.
Feel free to explain why the bailout had to be on the softest terms imaginable. Maybe taxpayers should have given them extra money to salve their hurt feelings? Perhaps the interest rate should have been negative? Heaven forbid that senior directors, equity holders or subordinated debt holders should face even more substantial losses when there are still poor people to tax.
