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Sunday, June 17, 2012

T is for Transfers

Paul Krugman on "What A Real External Bank Bailout Looks Like":

...Something I’ve been looking at: Texas after the savings and loan crisis of the 1980s.
The cleanup from that crisis cost taxpayers about $125 billion (pdf), back when that was real money. As best I can tell, around 60 percent of the losses were in Texas (pdf). So that’s around $75 billion in aid — not loans, outright transfer.
Texas GDP was about $300 billion in 1987. So this was equivalent to giving — not lending, not even taking an equity stake — Spain 25 percent of its GDP to bail out its banks.
And in the US it wasn’t even treated as an interstate political issue. ...
I think you can make a strong case that if Texas had been an independent country in 1986-87 it would have experienced a huge financial and fiscal crisis.

    Posted by on Sunday, June 17, 2012 at 03:24 PM in Economics, Financial System | Permalink  Comments (26)


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