CAMBRIDGE, MA December 20, 2011 - The US government saved the "too big to fail" banks in 2008. The reason? People were unable to pay their mortgages causing the banks billions in losses. The US Government authorized $700 billion to save the banks. The Federal Reserve Bank also gave them short-term loans that were even larger.
According to a report of the Federal Reserve Bank of Boston, there was another way. Why not save the people who were at risk? If the people were helped, they would be able to pay their mortgages, the banks would not have needed to be rescued and the financial crisis would have been considerably less severe. The cost? They calculated up to $50 Billion dollars overall - less than 10% of what was approved for banks.