New bailout programs?

I don't fully understand economics, as I'm sure even the top economists don't, lol. My questions is, won't providing additional bail out money just promote risky loans and greed, thus creating a visicous cycle?

3 Answers

Relevance
  • 1 decade ago
    Favorite Answer

    Yes.

    You understand economics just fine. If you subsidize something, you get more of it. Subsidizing failure means we will get more of it.

    Think about this: if banks were not insured by the government, then banks would have incentive not to write too many risky loans. (They would have incentive to wrote some, because the interest rates are higher.) With no taxpayer cushion and no government manipulation of the financial markets, this mess could absolutely have never happened.

  • Anonymous
    1 decade ago

    Who will be bailed out ? Only the fat cat rich and banks.

    I want to see a revolution. A bloody full on riotous backlash.

    Source(s): Power to the people right on !
  • 1 decade ago

    Sort of. On the other hand, it's pretty clear that the institutions would collapse without the bail-out, which would have significant ripple effects throughout other companies, corporations and even households. It's a crappy trade-off.

Still have questions? Get your answers by asking now.