alt Hacker NewsI remember the prevailing opinion in 2008 was that not bailing out would have caused much worse problems. We'll never know I guess
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We do definitively know, with climate change level certainty (read: there is still the odd ball expert that dissents), that it absolutely needed to happen.
What is much less known, because it kinda kills the talking point, is that the "too big to fail" bailouts were fully repaid with interest, to the tune of an ~$17B profit.
The losses from the program were from the auto industry ($12B) and the struggling homeowners fund ($31B). Which is a bit ironic, because those two are probably the ones that would have the most public support.
Some countries like Iceland let their banks fail (in no small part because their total debt was something like 10x their gdp), and they even successfully prosecuted a number of executives. They got moderate slaps on the wrist but did serve some token time in prison as opposed to having to pay a ground-breaking fine of 5 minutes of revenue as is more typical. It wrecked their economy in the short-term but they were back to growth by 2011, and had a larger than ever economy by 2015.
But I think more than the one-off situation is also the precedent it sets. When you can bank on the government bailing you out (pun intended I guess?), it creates a perverse incentive of just trying to get as large as you possibly can, all foundation or principles absolutely be damned - because once you get big enough you win, even if you're the biggest loser ever. And I do think that's what we're probably seeing with LLM companies.
Not that LLM's a loser - it's a revolutionary tech and will only become more so. But multi trillion dollar valuations for a product that has viable open competitors already available and whose operating requirements continue to plummet and will almost certainly continue to plummet? This is extremely amusing, but absolutely batshit insane. It's like paying millions for a pretty flower because it's novel in spite of the fact that you know, and everyone else knows, that once people start planting them there will be endless amounts available for negligible cost.
I think the precedent folks were pointing to was the great depression--no strong signal of assurance to temper public concern means things like bank runs and sudden collapses of institutions that would have otherwise made it because of group fear. Not sure how accurate that comparison is though.