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Question about bank bailouts

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jvhockey01 posted on Sat, Jul 14 2012 4:49 PM

If the consumers who have deposited in our banks lose confidence in the money substitutes and rush to the bank, causing the banks to be unable to pay their liabilities, what would happen to their assets (the mortgages and business loan accounts and student loan accounts, etc.)?  In other words, what would've happened if the government did NOT bail the banks out?  Would homeowners who have loans subject to a mortgage lose their homes?  Would graduates with student loans be free form their debts?   I didn't know the answer to this and my friend brought it up as a good justification for bailing out the banks.

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Bogart replied on Sat, Jul 14 2012 5:56 PM

If you are asking if the buyers of bank assets would forget about any accounts receivable?  The answer is no.  In a bank failure like any bankruptcy, the receiver or purchaser of the assets would still be collecting on any outstanding loans.

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