General Discussion
In reply to the discussion: You know the 1% are ripping us off to an astonishing extent, right? [View all]Taitertots
(7,745 posts)And they didn't have to because the government deregulated/under-regulated derivatives markets. So the company that owes you money never set aside money to pay off any losses. In the past, when they lost money, they just borrowed money from other people to pay. It works good for Wall Street as long as they can keep finding other people who will lend them money.
"I don't know whether that protection was as a result of loosening banking laws and regulations pre 2008 or how the bank bailouts were constructed.. but you make me understand that the end result is that the investment banks kept the bailout $$ as profit.. "
It wasn't so much that the bailout was profit, but that the bailout replaced the money that they took from investors. In simple terms, they went into debt (derivative liabilities), hid the debt from their investors and regulators (off balance sheet liabilities, deregulation), paid themselves with the money they borrowed (before the crisis), and ran for a bailout when people started expecting to get paid for their derivatives. They were protected from reasonable accounting procedures, protected from derivative regulation and protected from loss when the government bailed them out.