A similar situation arose during the Subprime crisis. Some of the banks at the time were partially nationalized, as was Citigroup, which received a $45 billion capital injection from the U.S. Treasury. But they should all have been nationalized - to be privatized at a later time once they have recovered from the crisis. The amount of money provided by the Federal Reserve during the present crisis being greater than that provided during the Subprime crisis; the case for nationalization is even stronger. Capitalism is a two-way street that rewards investors for astute decisions and penalizes them for bad ones. The Federal Reserve's liquidity injection policy is a one-way street: profits accrue to the private sector while loses accrue to the public sector. It's the privatization of profits and socialization of losses.
While Congress is to be congratulated for helping the common folks, the Federal Reserve is to be blamed for rescuing poorly managed American and foreign financial institutions, such as Citigroup, Goldman Sachs, JPMorgan, Nomura, Deutsche Bank, and many others. There goes the shortest, aborted, and unexplained American recession - a recession COVID-19 had little to do with!
[1] "repo" stands for repurchase in Wall Street lingo.
[2] Source: Historical Transaction Data - FEDERAL RESERVE BANK of NEW YORK (newyorkfed.org)
[3] Opportunities Exist to Strengthen Policies and Processes for Managing Emergency Assistance. July 2011.
(Note: You can view every article as one long page if you sign up as an Advocate Member, or higher).
