20 Nov 2022 12:12 pm
I don't really understand why the creator of this video is so enmeshed with calling hard assets "God's money" like its connected to the supernatural. Obama let Lehman Brothers fail, the common refrain at that time was "too big to fail". If the administration didn't bail out the banks the entire banking system would have failed. In other words, it was to save capitalism with regulation. Capitalism hasn't been practiced in its lassiez faire practice since the Progressive era.
I can explain the great recession briefly if it would help. There is an asset called Mortgage Backed Securities or MBSs. Basically, banks would take a large pool of mortgages, slice them up, and sell them to investors. The idea being that if you spread the debt around, they would be less risky. This led to banks loaning to "subprime" borrowers or borrowers with bad credit history. A turn in the market led to the lack of available payment for those assets from these "subprime" borrowers and brought the entire mortgage system down. The higher supply of houses made homes less valuable leading to a crisis where banks didn't have enough capital to cover their losses on the foreclosed homes. Hence, banks failed.
Now there have been reforms. Banks have to separate banking and investment activities so banks themselves won't be affected by the insolvency of investment activities. Also, there are "stress tests" to see if a bank has enough assets in case a crisis of capital happens again. If we lived in pure capitalism, we would be waiting in bread lines right now.
I can explain the great recession briefly if it would help. There is an asset called Mortgage Backed Securities or MBSs. Basically, banks would take a large pool of mortgages, slice them up, and sell them to investors. The idea being that if you spread the debt around, they would be less risky. This led to banks loaning to "subprime" borrowers or borrowers with bad credit history. A turn in the market led to the lack of available payment for those assets from these "subprime" borrowers and brought the entire mortgage system down. The higher supply of houses made homes less valuable leading to a crisis where banks didn't have enough capital to cover their losses on the foreclosed homes. Hence, banks failed.
Now there have been reforms. Banks have to separate banking and investment activities so banks themselves won't be affected by the insolvency of investment activities. Also, there are "stress tests" to see if a bank has enough assets in case a crisis of capital happens again. If we lived in pure capitalism, we would be waiting in bread lines right now.
Nothing is easier than defending the status quo.