system
Given the following post, respond as if you're commenting on Reddit:
human
ELI5: Why did the banks "need" to get bailed out after the 2008 crisis?

And why, when there is talk of bank insolvency today, is there still talk about "bailouts", but when other major companies look to be financially unstable, the same doesn't seem to apply?
gpt
With the exception of Country-Wide, US banks weren't really "bailed out" during the 2008 crisis - and CountryWide was bailed out by Bank of America, not the US Government.

To understand what happened in 2008 you have to understand how banks operate.  Banks need to have a total amount of assets that is equal to or greater than their total amount of deposits.  Most banks meet this requirement by holding a combination of cash, loans, bonds, and stocks.

In 2008 the crisis caused the value of those assets to temporarily drop - by a lot, and that drop meant that most banks temporarily had less assets than the value of their deposits and thus were insolvent.  But it was understood that the drop in asset value was very temporary, if the market stabilized and the asset values returned to their true market value, every bank except Country-Wide would be solvent.

To alleviate this, the Fed essentially suspended the solvency rules around the banks.  But for a variety of reasons the Fed didn't want to say that they were doing so.  Instead, the Fed made a bunch of very short term loans to the banks and allowed them to count the cash from those loans towards meeting their solvency requirements.  But most of those loans lasted 24 hours or less and no money actually changed hands.  Again, it was just a fancy way of suspending the solvency requirements without saying thats what they doing.

You can imagine it like an apartment complex where everyone who lives there is required to have a net worth of $10,000 at the start of every day or they get evicted.  Everyone in the apartment complex has much more than that $10,000, but they keep it in the stock market.  One day the stock market collapses, which means that the next day everyone has less than the $10,000 required to live in the complex.

The apartment owners realize that if they rigorously enforce the $10,000 asset requirement and evict everyone that they will go bankrupt.  The apartment also realizes that if they just wait a few months the stock market will go back up and everyone will once again meet the $10,000 requirement despite not having actually done anything.

The apartment doesn't want to say they're suspending the $10,000 asset limit, because that would make their tenants look bad.  So instead they tell the tenants that if a tenant is going to fall below the $10,000 requirement, said tenet can get a check from the apartment complex which will allow them to meet their $10,000 requirement on the condition that said check cannot be cashed and has to be returned once the tenant's stock returns back above the $10,000 limit.  

That's basically what happened with the US banks during 2008 which isn't really a "bailout".  The exception being Country-Wide, which was long term insolvent.  But Bank of America stepped in and bought Country-Wide before it could outright fail which is very similar to a government bailout, albeit paid for entirely by BoA.  One thing to keep in mind from this is that when you see all the internet rage at how BoA isn't being punished for fraud at Country-Wide - this is the reason why.  No one really wants to punish BoA for having very selflessly saved the US Government from having to make a difficult choice as to what to do with Country-Wide even though technically BoA is liable for the crimes that Country-Wide committed by virtue of the fact that BoA bought Country-Wide knowing full well that Country-Wide had engaged in widespread fraud prior to 2008.

When you hear about bailouts nowadays its typically in reference to European banks.  Those banks are actually long term insolvent.  They have far less assets than they have deposits and they will never return to solvency on their own.  So what is going on in Europe is largely that the EU is just giving those banks money, which is understood will never be repaid, so that they can continue operating.  They're doing that because if say, every bank in Spain were to suddenly fail that would destroy the Spanish economy and possibly cause severe damage to other countries within the EU as well.  Its also not practical, for political reasons, for the EU to take an ownership interest in those banks in exchange for the money, so the money is essentially being given away for free.