Yeah sure, there's that thing about derivatives and housing bubbles etc etc but if you distill it down into it's core concepts then the financial crisis was caused by the US not being able to generate enough debt to service it's existing debt - hence liquidity crunch.
Agree with this. This is the normal expansion/contraction of credit as part of the business cycle. The "crisis" part was just a rapid contraction, but it's not like every business cycle ends with a crisis.
What kind of proof do we have either way? It still has shareholders.
We see the actions of the Fed and we see the books of their shareholders. They're more transparent than most government organizations.
Sure, it's an accounting loss but we all know that that doesn't necessarily mean it's a real, fiscal loss of actual money that they'd accumulated in some way. They created that money from nothing, does it really hurt them if that nothing disappears?
This is where I think your disconnect is. When a bank loses an assets (loan default), and still has an outstanding liability (deposit), then it loses money (equity). That hits the bottom line in earnings and prevents it from paying out real cash in dividends. I don't understand why you think this is any different than any other company losing money.
They created that money from nothing, does it really hurt them if that nothing disappears?
The money was borrowed from someone else. Either they got it from depositors, or via the Federal Reserve system, or via issuing debt, or via issuing equity. They still owe that money back to someone, which is why losing that loan to a default is bad.
I get that it's complicated, but don't get caught up in the terminology.
Well, if you're insurance company could conjure up the money they would've paid out to you for nothing then how does that change the picture? Would you be happy paying all those insurance payments knowing that, if you ever did claim from them, they would just make it out of thin air?
If I could spend that money anywhere, why would I care where it comes from? At the end of the day, the insurance company is paying me money coming from the owners or money that they borrowed from someone.
I think you don't really understand the difference between getting cash via borrowing vs earnings. Every loan they issue has to come from somewhere (aka every asset has to be funded by some liability).