Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
You (and the author of that article) don't seem to understand that not just anybody can go borrow from the Federal Reserve. It's a heavily regulated market.
Obviously. That's never been the question. The question is whether we need or want such a centralized system with so few players. There should be far more competition in banking and finance.
You know what I understand?
Of course I'd support more competition that offers reliable, low-cost credit to business with acceptable terms.
I'm guessing you disagree with this.... Big Banks Still Needed to Keep US Competitive: Bove
But Bove, who has been a harsh critic of the Dodd-Frank bill, calls over-regulation a threat to the industry's stability as well as a blow against a U.S. economy that needs large financial companies to compete on the global stage — and to help finance the burgeoning $16 trillion national debt.
"I challenge anyone to explain which major nation in the modern world today or over the past five centuries has operated as a successful sovereign power without too big to fail banks, " he said. "If it cannot be done one should begin to understand the incredible threat being made to this nation by claiming that its biggest banks should be capped in size."
i know what you say, which i take as an indicator of what you do and do not understand.
Quote:
Of course I'd support more competition that offers reliable, low-cost credit to business with acceptable terms.
I'm guessing you disagree with this.... Big Banks Still Needed to Keep US Competitive: Bove
But Bove, who has been a harsh critic of the Dodd-Frank bill, calls over-regulation a threat to the industry's stability as well as a blow against a U.S. economy that needs large financial companies to compete on the global stage — and to help finance the burgeoning $16 trillion national debt.
"I challenge anyone to explain which major nation in the modern world today or over the past five centuries has operated as a successful sovereign power without too big to fail banks, " he said. "If it cannot be done one should begin to understand the incredible threat being made to this nation by claiming that its biggest banks should be capped in size."
Correct, I disagree with that point, and I also have a deep personal disrespect for Dick Bove.
In particular, his argument that we "need large financial companies to help finance the burgeoning $16 trillion national debt" is so absurd that it is making my head spin. The national debt is financed by the Fed.
I did; small business is the primary driver of economic activity.
Mortgages, on the other hand, are consumption.
what, from almost-nothing, to slightly more than almost-nothing ?
Big banks primarily provide credit to very large firms that don't need it, and to mortgages that are backed by the taxpayer via the GSE's.
Why don't large firms need credit? They need competitive multi-million dollar loans for commercial construction, high-price capital equipment, making large vendor pmts, etc. - things to increase profits and allow them to pay their employees. Are they supposed to operate on a cash basis? Would you prefer their credit come from foreign big banks? From the govt? From a credit union? Do you not think mid - large U.S. corps in the intl. market are not also important drivers of U.S. economic activity?
Yes, I do get it that the greed and sleaziness of big banks were one factor in the economic meltdown of this country in 2007/2008. I, too, retain a bad taste in my mouth about that.
And yes, I also get it that people whose homes were foreclosed on would resent the banks who gave them their loans which shouldn't have been granted in the first place, in many cases.
And yes, I also get it that the resentment of the "too big to fail" banks and their federal bailouts is a natural thing even though the bailouts have been largely repaid, and I even share that resentment. Hundreds of smaller banks were allowed to fail, so where is the fairness?
Yes, I too have moved some of my banking business to locally owned banks and credit unions as a statement of my views.
However, having said all that, I have been brought up short time and time again by the virulence of the hatred of the big banks as expressed here on City-Data, both in the Economics main forum and in the Personal Finance sub-forum. I am talking about foaming-at-the-mouth, exaggerated, bitter anger. Who can help me explain it? Have some people who have lost their jobs and suffered greatly on a personal level focused on the big banks as a sole cause?
There must be something more that I am not taking into account.
Banks had it coming. They charge fees for over drafts on debit cards, they charge for checks on accounts under a certain balance... high processing fees, hidden charges, most seem irrational and are meant to gouge depositors at every move. The banks get rid of one fee because of public and Congressional outrage and they then set up another.
Credit Unions and smaller banks (those left) do not get hit with the same anger. It is national and multi national banks that deserve what they get.
Why don't large firms need credit? They need multi-million dollar loans for commercial construction, high-price capital equipment, making large vendor pmts, etc. Are they supposed to operate on a cash basis? Would you prefer their credit come from foreign big banks? Do you not think mid - large U.S. corps in the intl. market are not also important drivers of U.S. economic activity?
I understand the banking systems pretty well and think that Hank Paulson should be tried for treason for what he did to this country by way of 'saving the banking industry' lest the world end on Monday. Remember that piece of horse manuire that he shoved down Congress' throat when he was trying to jamb TARP through so that his firm, Goldman Sachs, could be saved?
That alone is enough to hate the banks and the politicians which they have bought in order to freewheel through the remnants of our economy.
But specific to your point, i am at a loss to understand exactly what it is that these mega 'too big to fail' banks do that cannot be replicated by smaller organizations. Extend credit? move money? create products which are NEEDED? Conduct Forex transactions? Operate Cash Boxes? Manage Credit Card Programs?
I see these same services offered by many mid size banks will savy and fairness that would more than cover the needs of any multinational organization.
As to the OP's question, i think you can look to the privatize the gains, socialize the losses as the issue which irks me most. NOw they simply 'borrow' from us by way of deposits which pay no interest and lend to the Treasury to support the debt cartwheel. Anything that can't be sold is shoved down the throat of the FED, which gives them taxpayer cash for just about any clunker they can drag in. That's some business model. And that's OUR money in there.
That's enough to make you throw up, or hate the people that would pursue such a business model: the too big to fail banks.
What I said may have been ambiguous -- but I didn't mean that large firms don't need credit, I mean that big banks are primarily loaning to very large firms that have plenty of liquid assets but are choosing not to expand.
For a borrowing-and-lending system that derives its very power from the Fed's ability to create new credit dollars backed by the American taxpayer, it sure is centralized, opaque, and anti-democratic.
Quote:
They need competitive multi-million dollar loans for commercial construction, high-price capital equipment, making large vendor pmts, etc. - things to increase profits and allow them to pay their employees.
Then why are they sitting on mountains of bonds, rather than constructing, buying, paying, and hiring ? Why are private wages falling ? Obviously these big firms have oceans of credit available, and your theory is that this leads to economic activity, so where is it?
No, but the central banks shouldn't have a policy of "recapitalizing" the big boys at the expense of everyone else.
Quote:
Would you prefer their credit come from foreign big banks? From the govt? From a credit union?
There are a very wide variety of systems I would prefer over the current one.
However in general the problem is not where the credit originates (the fed), the problem is where it goes when it leaves the fed and into the private sector.. which are the primary dealers.
Quote:
Do you not think mid - large U.S. corps in the intl. market are not also important drivers of U.S. economic activity?
Of course they are, they just don't deserve special treatment.
I understand the banking systems pretty well and think that Hank Paulson should be tried for treason for what he did to this country by way of 'saving the banking industry' lest the world end on Monday. Remember that piece of horse manuire that he shoved down Congress' throat when he was trying to jamb TARP through so that his firm, Goldman Sachs, could be saved?
That alone is enough to hate the banks and the politicians which they have bought in order to freewheel through the remnants of our economy.
But specific to your point, i am at a loss to understand exactly what it is that these mega 'too big to fail' banks do that cannot be replicated by smaller organizations. Extend credit? move money? create products which are NEEDED? Conduct Forex transactions? Operate Cash Boxes? Manage Credit Card Programs?
I see these same services offered by many mid size banks will savy and fairness that would more than cover the needs of any multinational organization.
As to the OP's question, i think you can look to the privatize the gains, socialize the losses as the issue which irks me most. NOw they simply 'borrow' from us by way of deposits which pay no interest and lend to the Treasury to support the debt cartwheel. Anything that can't be sold is shoved down the throat of the FED, which gives them taxpayer cash for just about any clunker they can drag in. That's some business model. And that's OUR money in there.
That's enough to make you throw up, or hate the people that would pursue such a business model: the too big to fail banks.
I was questioning why a previous poster felt that big companies don't need credit. I found that surprising. My villain would be the govt., politicians, Paulson, bad regulation, etc. - not business/bank shareholders. I have no emotional feeling about "big banks." Big banks offer a service to allow many to start/grow successful businesses. If I could find cheaper money at a smaller organization, I'd go there. I'm not going to pay more interest money to a small bank or have more loan restrictions in order to make a point.
i said big banks are primarily lending to big companies that don't need credit.
and that is true, many firms have enough cash and investments right now that they don't need credit.
Big companies still need credit to run their daily operations.
Agree Big Corps. are sitting on large cash reserves.
Quote:
Originally Posted by le roi
Bank shareholders and management should have been wiped out in 2008 prior to the bailouts.
Agree banks/mgt should have been left to fail.
Quote:
Originally Posted by le roi
So why do the bigger banks' have a lower cost-of-capital than the smaller banks ? Ever wonder that ?
Yes, but I justify it knowing I (and many business owners) put the cheap money to good use by producing good U.S. product and employing Americans. I don't borrow money to speculate on depreciating residential housing or buy frivolous consumer toys. And I'm not going to pay more money for a business loan in order to make a point about banking. That would be irresponsible. The int. money I save will be used for good purposes.
So you recognize that smaller banks have a higher cost-of-capital, but you don't know why that is?
Quote:
Originally Posted by GoCUBS1
Big companies still need credit to run their daily operations.
i don't know what you mean by "need." if a company has enough cash, it doesn't need credit, but it's a ridiculous point you're pushing here, because they currently have more than everybody else.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
