If we bailed out real estate speculators, I wouldn't be surprised if something happened with college grads.
Unfortunately. I hate assuming responsibly for monetary decisions other than mine, but judging the trend, that's where we're headed.
Here's a Mother Jones article that takes this position:
http://www.motherjones.com/politics/2009/12/behind-real-size...
Can someone with more knowledge break down whether or not this is accurate?
If I loan you $1000 today and you pay me back $1001 tomorrow, my cost is not $1000. A whole lot of those programs look like that, short term loans or purchases of actual assets or whatnot.
Imagine you buy a house for $500,000, the value goes down to $150,000. The government, instead of paying $155,000 pays you $450,000. That sounds like an "open market transaction" but it is a gift, a bailout just by another name. Unfortunately they didn't do that with homes, they did it with mortgage bonds and CDOs, which meant that most of the gifts went to a small sector of society in lower Manhattan and around Greenwich Connecticut.
So it's technically right, in a sense (or it was when it was written last decade), but it isn't trying to answer the question you're asking, it's horribly outdated, and it's larded with weasel words.
"[T]hese guarantees could have potentially cost the federal government more than $3 trillion..." but actually didn't. "[T]he government's potential exposure from the PPIF is between $500 million and $1 trillion..." but they ended up turning a profit on it. "As of December 21, 2009, $117.5 billion of that has been repaid..." and subsequently the rest of it was too. "The Treasury has bought $200 million in preferred stock from Fannie Mae" and then ended up quasi-nationalizing it and has since been making a hefty profit on it.
And so on, and so forth. What the report shows is that the financial crisis had enormous potential price tags attached to it, but the bills never ended up coming due. Whether that was luck or skill remains to be shown. :)
> the real cost of the bailout was much, much higher
No. You can argue about the true underlying risks, and the proper risk adjusted interest rate to nominally charge when lending government funds to a quasi-government entity with an effective government guarantee, and the option value of the bailout, and you can argue that it, on balance, cost a few billion, or quite a few billion, or maybe even turned a profit. I think the CBO scored it at $60 billion a while back; I'd lean towards the "cost a couple hundred billion" answer, but it's ultimately too complicated a question to ever really have an answer. Especially if you try and estimate the cost compared to some other policy. :)
https://en.m.wikipedia.org/wiki/Troubled_Asset_Relief_Progra...
But how much did it cost to borrow the bailout money at first place ? I'm pretty sure the US government didn't have trillions in cash at that time.
https://www.treasury.gov/resource-center/data-chart-center/i...
Printing money tends to increase interest rates, which benefits debtors (anyone who owes money on a credit card, student loan, or a mortgage - which is pretty much everyone). If inflation is happening, you get to pay back your today-money-debts in weaker-future-money which means you pay less in real terms.
Regardless, not all that much of the quantitative easing money actually entered the economy because it was largely hoarded by banks to shore up their balance sheets post-collapse.
Consider housing prices being at enormous highs throughout the country -- that is directly related to low interest rates. It affects all people who dont own a home. It benefits land and home owners. It is a lop-sided benefit bourne by the young and poor.
I guess whether you think the negative effect of the bailout on savings and such were worth it depends on whether you think the entire insurance market almost collapsed.