Bailout 13: Does the bailout have a chance of working? 

''...if you have a dead skunk in your house, you won't notice that the milk is going bad...'' genius :D

Sal, its been 4 years and I am still watching your videos and learning. Just remembered I had had a brief contact with you here here a long time ago. Thanks and respect!

thanks you so much for this Sal, 12 years later people like me are still learning from you and will continue to learn for years to come.

Home values will not go to zero. They will adjust to some price where an investor will can a decent return on the asset based on potential rent (or rent saved). This is how all assets should be valued (vs. speculation on asset appreciation). Unfortunately, in most of the country (especially Californa), prices haven't adjusted to the point where one can make a good risk-adjusted return.

Good question. I think a lot of these people understand less than they let on. Also, the compensation structure in finance encourages people to maximize their bonus in the short term (usually by taking on more risk when times are good). Very few people at these banks really cared about the long-term viability of what they were doing.

great explanation, clear and easy to understand. Why isn't anyone else trying to explain all of this to us?? they don't want us to know the truth--it all stinks!!

"If you have a dead skunk in your house, you won't notice that the milk is going bad" LOL

As a result of all the profit/bonus takers, inconsidreate "banksters", etc.. I have made the decision to avoid all (most) counter-party risk (anything paper) and go with Land, Silver, and Gold. Having real, physical assets (silver, gold, income property) helps me sleep better at night. There are WAY too many crooks out there today... Great video's Sal ! You continue to help sooo many people everyday !!!!!

Tom - Yes, I did happen to watch it sometime back. I think I understand this whole affair much better now, and the simplicity of it , in terms of the general principles at work, still amazes me...

"The stinkiest of them all". Ahah such colourful language ! Love it, greetings from France.

Sal, you totally rocked in this presentation.!! Great work.

Let the system run its course. These sorts of things have a way of working themselves out (even if the situation has to become the ugliest of uglies).

Thanks for the ACC 101 lesson! However, you're missing that banks usually have a provision for uncollectible accounts built in to their balance sheets (contra asset). These accounts grew and that's pretty much what the G is trying to cover. Banks have plenty of good assets- be it private equity, commercial and even subprime loans that they are and will be collecting. People like you should be in the business of writing fiction novels and not further contributing to the halt in this economy!

Back here in 2020 😶

great vid. I'd love to see one on hyper inflation, or the potential fall out of using the cash (the only thing that isn't stinky...(or at least the least stinky) to secure this whole structure.

Great video!!! More people need to see this.

Sal...great work. Here we are now, nearly 4 years down the road. The melt down seems like a distant memory. The stock market is acting like everything is good, reaching toward the highs. Mortgage rates are at all time lows. Life is good, right? But something just doesn't feel right about all this. I keep thinking if the Fed wasn't out there doing its QE thing, life wouldn''t appear so rosey. Am I wrong? Can they successfully 'paper' over the underlying problem. What happens when QE stops?

Proposal (btw i dont know anything about economics so im probably wrong i just want to know why): Why the U.S just simply bails out the homeowners instead of the banks??? So they pay their mortgages and the banks get their money back. With the condition that the homeowners will pay an affordable monthly rent so the government will become like a massive LANDLORD and gets its money back. In regard to the "gamblers" like AIG and such, let them die, they are not a piece usefull for economy.

Yup, the bailout was a bad idea. Now, after years of sitting around we finally are protesting the bailout.

Hello Khanacademy, I was under the notion that the reverse auctions are done in secret and the information regarding the selling of assets by banks in the reverse auction are kept private in order to not stir up the blacklisting of banks by other banks? I am a college student studying Business and the macroeconomics book im currently using states this. by the way love your videos

"...when you have a dead stinky skunk in your home....." nice lol

Excellent. Thanks!

I really like your videos, but the tone of this one was a little off.

I like to look back to see where we were!:-) Lot's of temporary panic!!!! :-D Great video though!!!

In the end, what did they do?

@kotpet jobs, employment, confidence in the economy, political trust and stability? so many things could go wrong.

Great work, Sal! Thanks a lot for these videos. The only thing I cannot understand is, if everything-- right from the housing price bubble to the systemic risk chain reaction-- is this simple to explain (for which a lot of credit goes to you), why didnt the 'smart guys' out there, the Ivy League MBAs making a fortune in the I-Banks, see it coming much sooner!? How could such prestigious institutions, the pillars of american capitalism for more than a century, just be so stupid?Blinded by greed??

@PRINCECOUNTYBEATS "The Troubled Asset Relief Program (TARP) is a program of the United States government to purchase assets and equity from financial institutions to strengthen its financial sector that was signed into law by U.S. President George W. Bush on October 3, 2008." Not that it matters but I hate partisanship.

I love this lmaooo

Please tell me if there is an updated version of this, I'd like to know about the present President and the congress that is providing bailouts to the banks these days, let's say in the past few years since this has been posted. I am not sure, but it seems to me that the President is not the only one to blame, whether it is Bush or Obama, don't they both basically have a lot of people (Senators and Representatives) who enable these types of tax 'crimes" (bailouts) to continue?

So this vid was posted last october.. this is 06/30/2009......... no collapse - yet where are the banks today?

@nikanj Lol, if by worked you mean 'loads of the publics money disappeared into the ether and we are still in an economic swamp' then hell yes it worked.

Isn't the real problem with the "trend"? Can it be broken? To assume that everyone's home value is going to zero and the economy is going into a depression is somewhat of a self fulfilling prophecy? When renting is more profitable, then buyers buy the distressed homes. That will not be zero. Iliquidity is due to PERCEPTION and FEAR. That is what one of your earlier videos started with, but it appears you didn't come full circle. Could it be your own perception is "stinky."

@nikanj Lol lets just hope it all goes away soon, and we get some people in charge who know what they are doing :)

@causeimthesquid Is now premature?

Ahahahah Sal! A lot of stinky assets here!

@cds162 Greece

Whos going to bail you out when u go to jail for touching my daughter?

Quite premature to say anything worked nikanj.