8 ms·

Didn't the US do something similar in 2008? They step in and take care of the banks.

• Retric 7y ago
  “Chinese government will step in and take care of everyone” The US government very much did not do that. The US let a lot of banks fail and housing prices to collapse. They did save a few banks, and most bank customers. But, most of this was adding short term liquidity to the market and otherwise healthy organizations. PS: “Mark to market” https://en.m.wikipedia.org/wiki/Mark-to-market_accounting https://en.m.wikipedia.org/wiki/Mark-to-market_accounting is an important safeguard. But, it increases the short term risks of systemic collapse.
  • YjSe2GMQ 7y ago
    Not to mention that the Fed made a "profit" on the liquidity injection. "Profit" because central bank doesn't really care about anything like profit, but the point is everything was repaid. That being said, there's a widespread belief called "Greenspan put" or "Fed put": https://www.daytrading.com/fed-put https://www.daytrading.com/fed-put
    • ethbro 7y ago
      It's hard to imagine central banks not making a profit on liquidity injection. As long as they have a semi-accurate pulse on real asset values, as a lender of last resort they have the sole ability to buy assets at distressed values. Nobody else has the ability to take a bath as the market implodes and simply create new capital to buy things at less-than-face-value. You'd only expect things to go really bad if the Fed mispredicted actual values.