The 2008 Bank Bailout – A Children’s Story

4 10 2008

Note: This is a fictional story based on real events. It has been simplified, so the children can understand.

Hello there boys and girls, I’m here to tell you a tale about three people who have been forced to live together for a long, long time. They’ve lived together for so long that they now need to each other, and if one of the three left, the other two wouldn’t know what to do.

These three people are named Lender, Person and Gov.

You see, they need each other because Lender has money that Person needs, Person has votes that Gov needs and Gov has regulation, which Lender needs. If any of these people stop sharing what they have with the others, all Hell could break loose.

One day, the system started breaking down. Gov wasn’t giving Lender enough regulation, Lender wasn’t giving Person as much money, and Person wasn’t giving Gov the votes he needed.

Without enough votes, Gov couldn’t make the right decisions and might not give Lender the right amount of regulation. Without the right amount of regulation, Lender won’t give Person the right amount of money. And if Person doesn’t get money from Lender, he has to get it himself and won’t remember to give Gov votes.

No one knew who started the chain of disaster. All that was known was it needed to be fixed.

Person and Lender didn’t want to be held responsible and ran to Gov to fix everything. Even though Gov wasn’t sure if this was completely his fault, he decided to take it upon himself to fix the whole situation. But how was he going to do that?

The three "wise" monkeys of the story

The three "wise" monkeys of the story.

Well, it turned out Gov had a lot of money he didn’t think he needed for anything more important, so he started giving a bunch of it away to Lender. Gov thought giving Lender a lot of money would mean Lender would have money to give to Person, and the whole cycle would work again.

The problem was Lender didn’t need more money, in fact, he had too much money in the first place. If Lender didn’t have so much money in the first place, maybe he wouldn’t have given it all away to Person before realizing that Person wasn’t going to give much of it back.

You see, Lender needed more regulation, not more money. But I’m not sure Gov is to blame. The lack of votes Gov got from Person led Gov to those bad decisions in the first place.