Instead of government bailout money being used to rescue those “underwater” with their mortgages and otherwise buoy up consumer demand, much was invested by the finance industry in itself, while much of the cost of the bailout ultimately fell upon the general public, further depressing demand. This resulted in the bankruptcy of many small businesses, further mortgage foreclosures, and further dampening of demand, accompanied by reduction in property taxes and so on, the reduction in spending by, and in some cases bankruptcy of, local government, further unemployment, and so on. While tellingly post 2009 the financial bubble, boosted by the supply of bailout money to the finance industry, and the return of inadequately collateralized financial instruments, resulted in an enormous stock market boom.
Supply Side Stimulus: The Bailing Out of the Finance Industry, and It’s Ensuing Self-Dealing Slowing Down Recovery