It is no surprise that Treasury made a profit on its investments in troubled companies, since the fact of investing in them effectively rigged the market in their favor: If the government declares that it will not allow a company to fail, the company’s borrowing costs are reduced and it now has a competitive advantage over companies that do not qualify for government intervention.
Of course the qualifications for this special treatment were: being very big, being politically well-connected, and having taken stupid risks. So every well-run, medium sized bank that didn’t have an army of lobbyists got screwed. And now we see that our favorites have prospered and declare “profit!” while ignoring the red ink for everyone else in the economy.
Of course the qualifications for this special treatment were: being very big, being politically well-connected, and having taken stupid risks. So every well-run, medium sized bank that didn’t have an army of lobbyists got screwed. And now we see that our favorites have prospered and declare “profit!” while ignoring the red ink for everyone else in the economy.