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Originally Posted by sebastian_dangerfield
1. Banks are not different than other businesses. We protected GM and AIG for the same reason we did banks. TBTF.
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No, we didn't. Where we protected AIG (and it wasn't everywhere) it was because (1) it was involved in lines of businesses like the banks, and (2) it was financially intertwined with the banks (i.e., it had written "insurance" on the questionable assets on the banks' books). We bailed out the banks and AIG so that we could maintain functioning financial and payment systems and avoid a depression.
We bailed out GM and Chrysler (don't recall whether Ford got help) because of the direct loss of jobs in the auto industry associated with their failure. That would have been bad, but that's not the stuff of total economic collapse.
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2. The assets only recovered value because we propped them up with accommodating monetary policy
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This is one of the crazy/stupid things you say a lot. The assets recovered their value because the underlying mortgages performed better than people feared during the bank run height of the crisis. There's nothing to recover if people aren't paying their mortgages.
Yes, accommodating monetary policy helps people keep paying their mortgage in a number of different ways, but that doesn't seem to fit with your implied conspiracy.
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and direct purchases of MBS.
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That gets the banks/investors paid, but it does nothing for the performance of the MBS going forward.
