The "easy" answer to this question is: American taxpayers who collectively bailed out Wall Street and various failed banks and financial institutions. The not-so-easy answer is what I'm trying to figure out. Specifically, which individuals (and/or groups) are having to "eat" the losses on defaulted mortgages and other assets that went bad in the 2008 financial crisis?

A comment I read in a book stated that the worst possible outcome a mortgage lender can face is an unoccupied dwelling as that "asset" will be worthless. The value of the loan will never be repaid once all the fixtures have been stripped from the dwelling. (There are literally millions of abandoned homes - with defaulted mortgages - that meet this description.) So, once a home is abandoned and the loan on that home is not performing, the asset, for all practical purposes, is worthless - the "loan" will never be repaid. The thing though is that all debts eventually get repaid one way or the other - somebody winds up eating the loss.

My understanding is that the Federal Government, (in order to avoid widespread banking failures and another "Great Depression 2"), used the TARP [Troubled Asset Relief Program] to transfer all these non-performing assets from the balance sheets of the banks to the balance sheet of the Federal Reserve, our nation's Central Bank - aka the "Lender of Last Resort". So now our Government, in the form of the Federal Reserve, owns trillions of dollars of [worthless?] assets that will [never?] be repaid.

If it is correct that the Federal Reserve will probably never recover the full value of these non-performing "assets" that they have purchased, how (exactly) will all this debt get taken off their balance sheet? If these assets are, in fact, substantially worthless, who exactly eats the loss? How does the Fed get these impaired assets off their balance sheet?

https://www.treasury.gov/initiatives...P-Tracker.aspx

The idea that the TARP assets are worthless is not correct at all

Ron

Grunch: The American taxpayer, ldo.

http://www.wsj.com/articles/ally-fin...ake-1419000430


Really, I think the unpopular Wall St part of TARP was profitable, which in turn was able subsidize the losses from the popular auto portion, without the taxpayers having to foot the bill.

Nobody ate those losses.

They were repaid years ago.

LOL Savers. The government isn't obligated to provide an interest rate you find attractive. Go find a productive investment for your capital or stop bitching

How does this affect borrowers?

What what you have done instead of TARP?

Nation as a whole?

Did you forget the historically low rates on mortgages as well as on a variety of different lendkng products? Off the top of my head half the adult population own housing, low interest rates helps them immensely.

the federal reserve isn't the country's national bank. the federal reserve is made up of private banks that are not part of the government.

Why Smart People Do Dumb Things

I'm reading a book, (i.e. "House of Cards: A Tale of Hubris and Wretched Excess on Wall Street"), by William D. Cohan.

https://www.amazon.com/House-Cards-H...2106406&sr=1-1

Mr. Cohan's book revolves around events leading up to the 2008 collapse of Bear-Stearns, a Wall Street investment bank that had been in business for over 80 years. In the book there's a fairly detailed account of a prior event that occurred in September of 1998 - the collapse (and subsequent bailout) of LTCM: Long Term Capital Management.

https://en.wikipedia.org/wiki/Long-T...t#1998_bailout

LTCM was a hedge fund run by a group of real smart guys (including two Nobel Prize winners) who thought they had figured out a foolproof way of beating the market. Unfortunately, the real world intervened and these "geniuses" suddenly became idiots.

Warren Buffett was involved (briefly) in the LTCM saga. Before the New York Federal Reserve Bank stepped in to organize a private "rescue" of LTCM, Mr. Buffett (along with Goldman-Sachs and AIG) offered LTCM's partners $250 million in exchange for taking over - and running - LTCM. However, there was a catch: Mr. Buffett gave Mr. Meriwether, the lead LTCM partner, less than an hour to make a decision. Meriwether declined Buffett's offer. Years later, during a discussion recalling the LTCM debacle, Buffett gave an amusing story concerning his thoughts about LTCM.

https://www.youtube.com/watch?v=i-XSi-M1ZkU

this is the correct answer

Sure, there was never a financial crisis before she came along and ruined the worldwide socialist utopia.

https://en.wikipedia.org/wiki/List_of_economic_crises

She didn't cause all of them, just 2008. Ok, if you want me to be more serious, her disciple:

Micro:

There's another revealing C-SPAN clip (circa 1999 or thereabouts) where Greenspan, Robert Rubin, and Brooksley Born, the head of the Commodity Futures Trading Commission, were testifying before the House Banking Committee. Ms. Born was pleading for the need to have greater transparency and regulation of derivatives. (Ms. Born strongly believed that there needed to be a clearing house where these unregulated instruments could be publicly listed just as stocks and bonds are listed on the NYSE, the OTC, and other markets.) Mr. Greenspan, as Chairman of the Federal Reserve, was adamantly opposed - he felt there was no need for such transparency. Greenspan was so unhappy with Ms. Born and her position that you could see his face flushing - he could barely contain his contempt and disdain for Ms. Born. Members of the banking committee, seeing this divergence of opinion between a regulator of a relatively obscure Government agency and "The Maestro" [Mr. Greenspan] obviously chose to side with the latter. At one point during the hearing Spencer Bachus, chairman of the committee, plaintively asked Ms. Born: "Who are you trying to protect?" Her response: "The American people."

In the aftermath of the financial crisis, in recognition of her courage and determination in standing up to Greenspan, Caroline Kennedy presented Ms. Born with a "Profiles in Courage" award. BTW, it's no secret that Mr. Greenspan is a great fan of the late Ayn Rand.

Surely being middle brow enough to like Ayn Rand should be immediate bar to entry to positions such as head of Yanklandia CB.

As to who is on the hook, will be much easier to answer after 2018 crises.

In Europe on hookness is a bit more obvious though, whoever is suffering due to ******ed austerity programmes.

@Alan - Your post shows an incredible amount of ignorance about this topic. Mortgages are and were pooled then packaged as bonds of varying grades. These bonds are referred to as Mortgage Backed Securities (MBS). The bond rating agencies rate the quality of the bonds. Read up on Collateral Debt Obligations (CDO) to understand how the pooling works. To make a long story short, a lot of people/institutions lost money on the bonds.

The problems arose from faulty assumptions were made in rating the bonds by the rating agencies in their models. Bonds that had no business being rated rated AAA were. If you read up on CDOs you will understand how someone like Goldman Sachs got in a lot of trouble and why the Fed decided to bail out AIG. Also you will get an insight into the rationale behind at least part of Dodd/Frank. Also read up on fractional reserve banking and mark-to-market accounting. The Fed has made billions (which they have returned to the the US Treasury) buying up MBS at discounted prices. Fading panic ftw.

The government did bail out the banks to avoid the Great Depression part 2.

And it failed. Probably because they made the same mistake FDR himself did.

Keynesian conventional wisdom is that counter-cyclical fiscal policies are the way to dig the economy out of recession. Keynesian conventional wisdom was proven decisively wrong in 1931, and again in 1972, but it just won't ****ing die. And now Krugman is blasting German austerity, when the evidence is actually that countries that keep their budgets closer to balance have better economic performance, because government borrowing crowds out new investment and prevents bad investments from getting purged.

So we are in the Great Depression Part II?

We are.

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Left wing media shows that they cooked their books. The New Deal was said to not decrease unemployment while they explicitly did not count New Deal created jobs, labeling them "temporary."

http://www.salon.com/2009/02/02/the_new_deal_worked/

Krugman's response as well. They weren't entirely FOS, but argued in bad faith.

http://krugman.blogs.nytimes.com/201...nomic-history/

And, what does one of the authors of the study say anyway: http://newsroom.ucla.edu/stories/pro...ls-years-later

The problem (or a significant one anyway), later addressed by Roosevelt, was that the National Industrial Recover Act of 1933 led to more monopolies and the Roosevelt administration brought very few antitrust cases.

For some more than others.

Well then the GD I survivors must be the biggest whiners of all time.

This is pretty mild, compared even to the 70s when I grew up, or the early 90s when I graduated from college.

A depression is a period of prolonged strong joblessness and stagnation, where the current generation is in decline compared to their parents.

The difference between this and the Great Depression is America was poor during the GD, and it was poor before it as well. This despite being the wealthiest nation on earth. The world was poor, on account of being much more technologically primitive.

Our depression occurs on a much higher baseline. We've solved basic problems like how to produce enough food for everyone and how to produce houses and entertainment and cars etc. relatively cheaply. Millennials are still a lost generation, after a fashion, but the main symptom is widespread joblessness and listlessness, rather than outright deprivation.

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