With so much garbage commentary being thrown around about the bailouts, it’s interesting to see a writer in a very popular forum talking about some of the real good and bad of the bailout.
First, the good:
- Regulation is necessary to reduce systemic risk – What happens without regulation? Too much risk leading to a collapse of the system.
- It is actually cheaper for us as taxpayers to save the banks then to let them go under. Why? Because of FDIC insurance, we would bankrupt the country in payouts.
- The TED Spread is down from a high of 5 to 1 meaning banks are more willing to lend to each other.
Now, the bad:
- Government intervention distorts the market. By using federal bailout money, a company like AIG can undercut competitors.