What happened to the capitalist mantra of "allow mismanaged companies to fail?" The bank bailout of 2008 was unnecessary. Unlike 1929, we had FDIC in place and the federal government could have stepped in to take over any failing financial institution and not just write a blank check to prop up mismanaged banks and financial institutions. Fed Chairman Ben Bernanke scared Congress into it. “If we don’t do this today we won’t have an economy on Monday,” is the line famously attributed to Bernanke. Congresses $700 billion to bail out the banks was the banking industry bailed out by its allies in government, Bernanke & Geithner,
The banks sold bad mortgages to European banks and much of the money was to bail them out. It was also an opportunity for the banks and mortgage companies to destroy their rivals.
It is a little more complicated than that in 2008.
There was a liquidity freeze.
Imagine if everyone who owed you money all refused to pay you at the same time—and now you have no cash coming in...
They owe you the money—everybody agrees on that—but they refuse to pay you now.
That means you have no cash—now.
Then you can’t pay people you owe—now.
In 2008 the big banks hit that liquidity freeze.
Accounting does not matter at that point.
What they needed was cash—now.
At the end of the day (after a couple of years) the banks did repay .gov in full.