Wall Street Bail Out Pros & Cons
In 2008 the U.S. financial sector experienced a deep crisis. Wall Street giant Bear Stearns collapsed almost overnight, and every other Wall Street firm was in danger of collapse. Washington rescued Wall Street with a $700 billion bailout.
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Background
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The speculative inflation of housing that had created billions of dollars of "fictional" value began deflating and triggered a panic in the financial markets. The financial instruments of this speculative frenzy had infiltrated the entire international finance, insurance and real estate (FIRE) sector. These instruments came to be known as "toxic" assets. The bailout plan was called the Troubled Assets Relief Program, or TARP.
Pros
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Supporters of the bailout say the bailout was unpleasant but necessary to prevent an economic collapse. The argument was that Wall Street was "too big to fail," and a collapse of Wall Street would bring down the whole economy.
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Cons
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Free market conservatives who opposed the bailout say the market should rule and that Wall Street should have failed like anyone else. Other critics argued that the bailout simply postpones the inevitable. Still others cite the unfairness of rewarding the institutions who created the problem.
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