Bailout, Bailout, Everywhere

One of the problems with public opposition to bailouts is that they don't actually stop bailouts from happening, they simply encourage governments to do what banks want and structure the bailouts in complicated ways that obscure what's happening. For example, as German politicians huff and puff about bailout out irresponsible EU countries they're actually bailing out German banks:

The announcement on April 6th that Portugal will become the third euro-area country to receive a bail-out was not well received in Germany. As the largest euro-area country, it is contributing 20% or €52 billion ($75 billion) to the bail-out funds of the three profligate countries, mostly via the euro area's European Financial Stability Facility. This is dwarfed however, by Germany's banks' exposure to the three countries, which totals €230 billion. Only around 12% of this is sovereign or public debt, but a sovereign default could easily lead to a slew of domestic bank and corporate defaults too, to which the country is far more exposed.

The remarkable thing about the discourse around this is the hegemony achieved by the view that when an unsustainable debt relationship occurs, it's the borrower who was being irresponsible. When you take out a loan, you have to make interest payments. You're charged interest precisely because the lender is taking on default risk and giving up liquidity. Of the two parties to the transaction, one—the lender—is the putative professional in the room, the expert assessor of risk. You don't bargain with a bank and say "pretty please give me a lower interest rate." You ask for a loan, the lender looks at the situation and makes you an offer, and you take it or leave it. Had German banks appropriately assessed default risks from Ireland, Portugal, etc. they would have asked for higher rates and fewer people would have borrowed. But the savers and financial intermediaries in high-savings countries failed to manage the capital flows responsibly. And now they're getting self-righteous about it.