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So you recognize that smaller banks have a higher cost-of-capital, but you don't know why that is?
I didn't say that - I said I'll take the cheap money because I believe my business and employee needs justify it. I feel an Adam Smith type lecture about rentier class coming on... been through this B4 with posters.
Quote:
Originally Posted by le roi
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.
The above-bolded point is ridiculous.
Let me give you an overly simplified example.....Company A is producing (or reselling) equipment for $800K. It needs $500K of material (or manufacture cost). Company A's customer will not pay them for 60 days when they receive product. Do you think the vendor is going to just extend, say, 90+ days credit on $500K? How will Vendor B pay it's own bills/payroll/etc? Do you think it's prudent for Company A to clear out cash reserves to pay this? Can I get any more black and white for you? Also, should a company just pay cash for it's new $30 million dollar factory? This is where big banks come in. COMPANIES NEED CREDIT TO OPERATE effectively and competitively.
Get back to me when you have some experience running and financing a business.
I didn't say that - I said I'll take the cheap money because I believe my business and employee needs justify it. I feel an Adam Smith type lecture about rentier class coming on... been through this B4 with posters.
I asked you if you noticed the bigger banks have a lower cost-of-capital than the smaller banks and you said "Yes." Do you remember this ? Just scroll up. You may need to navigate to the previous page in the forum thread.
Quote:
The above-bolded point is ridiculous.
Let me give you an overly simplified example.....Company A is producing (or reselling) equipment for $800K. It needs $500K of material (or manufacture cost). Company A's customer will not pay them for 60 days when they receive product. Do you think the vendor is going to just extend, say, 90+ days credit on $500K? How will Vendor B pay it's own bills/payroll/etc? Do you think it's prudent for Company A to clear out cash reserves to pay this? Can I get any more black and white for you? Also, should a company just pay cash for it's new $30 million dollar factory? This is where big banks come in. COMPANIES NEED CREDIT TO OPERATE effectively and competitively.
Get back to me when you have some experience running and financing a business.
we were talking about firms with large amounts of cash and bond assets, if you recall. A company like google with $50 billion in cash doesn't need to borrow money to finance its operations.
and no, whether it needs to and whether it is advantageous to do so are not the same thing.
I asked you if you noticed the bigger banks have a lower cost-of-capital than the smaller banks and you said "Yes." Do you remember this ? Just scroll up. You may need to navigate to the previous page in the forum thread.
we were talking about firms with large amounts of cash and bond assets, if you recall. A company like google with $50 billion in cash doesn't need to borrow money to finance its operations.
and no, whether it needs to and whether it is advantageous to do so are not the same thing.
Don't recall you bringing up bond assets, but I do believe issuing high-yield bonds can be a good financing alternative. We were talking about the finance needs of mid-big business. You bring up an example of Google - a highly successful large corp. who happens to be entering the banking industry. You think Google is representative of most mid & large companies?
I am all for bank competition from smaller banks, or the bond market, or Google bank - this competition will force big banks to become more competitive with their fee structures/terms. But I still do not hate big banks. I have no emotions whatsoever about lenders.
And I believe a for-profit company reporting to shareholders should always take the advantageous route to cut expense/increase profit.
Let me count the ways. As a Payroll Administrator I was asked to falsify completing a Verification of Employment. They burried this country in debt by doing the following things:
a. telling people they could afford that dream home mortgage when clearly they could not
b. assisted their clients in filling out mortgage applications with false information
The clients in the above cases were good honest people but not financial savy so they believed what these bankers said and went for it. They ultimately found heartache as home after home was foreclosed on. I haven't decided which is worse losing your dream home or being lied to. Whatever the case my heart goes out to those
people.
c. then these moprtgages were sold to government backed institutions like Fannie May or Freddie Mac
Despite all the harm they have done they continue to receive million dollar bonsuses. Is there something wrong with this picture or what.
Yes, there's something very wrong with that picture.
I once, on the spur of the moment, popped in to an real estate open house at the Jersey Shore. It was a three-story Victorian that had been re-habbed. I just went in out of curiosity to see what had been done to the house. When I came out, a tall, good-looking man met me on the porch, grabbed my hand, introduced himself and said, "What can I do to get you into this house?" Just like a car salesman in a showroom. I started laughing, "That house is beautiful, but the asking price is over a million dollars." He replied, "Do you have a job?" I said, still laughing, "Yeah, and it pays me $52,000 a year. I can't afford a million dollar house on the ocean."
You can guess his reply, "What if I tell you that you CAN?!" I have half a brain in my head, so I beat a hasty retreat, but not until Mr. Mortgage Scam Artist had pressed his expensive-looking business card in my hand.
I don't have much of a head for money, but that was when I began to suspect that the housing market was going to crash. How many people, maybe ones who made twice what I did, might have believed they could "get in that house"? PJ, you are right. People were lied to. And in a country where public schools have no requirement that students learn anything about personal finance, that lying — when it also involves taking someone's money — should be a crime.
And don't give me that caveat emptor bull. There's a big difference between capitalism and predatory capitalism. The latter is being practiced in this country every day, from coast to coast, in every type of business. It's wrong any time, but when it involves the roof over a family's head, it's the saddest and most rapacious crime of all.
Because they are stealing our money (through fees and outrageous service charges). Crooks!
Gee, that's strange. I've been with Wells Fargo for over 25 years and have paid them a fee or service charge only one single time - when I needed a wire transfer about five years ago.
Did you know that most banks will give you a free checking account if you just set up one single electronic deposit with them on a monthly basis, for example your pay check or Social Security check? And as for the people who have mentioned overdraft charges on debit cards specifically, that is something which is totally, 100% in the hands of the consumer to avoid. The consumer is in the driver's seat with regard to that particular fee - just don't spend money you don't have. Adults are supposed to assume some responsibility for themselves.
Gee, that's strange. I've been with Wells Fargo for over 25 years and have paid them a fee or service charge only one single time - when I needed a wire transfer about five years ago.
Did you know that most banks will give you a free checking account if you just set up one single electronic deposit with them on a monthly basis, for example your pay check or Social Security check? And as for the people who have mentioned overdraft charges on debit cards specifically, that is something which is totally, 100% in the hands of the consumer to avoid. The consumer is in the driver's seat with regard to that particular fee - just don't spend money you don't have. Adults are supposed to assume some responsibility for themselves.
I'm no longer with Wells since they tried to charge me a fee for cashing a check at a different Wells branch than where my account was... spoke to the Branch manager who said she would waive the fee and I could avoid future fees if a transferred my account to her branch
When I started banking... there were no checking account fees and I didn't need any direct deposit.
It also included a paper statement mailed to my home each month and my cancelled checks and new additional checks were also free as long as they were corporate image and not the designer type.
Yes... I still have "Free" checking... but, my Free Checking requires a direct deposit, no longer provides free checks or returns cancelled checks... for a while they did return images and now that is a monthly charge.
The Checking might be Free in some situations... the services provided have been drastically reduced.
Yes, you're missing the fact that most people need a scapegoat to conveniently blame for all the short comings, rather than to look for the true source of their problems - their own lack of self discipline and poor choices. It's very difficult for people to look in the mirror and realize that their problems are mostly their own doing, and for the last four years, the government and their media lapdogs have done a very good job of turning the banks (and corporate America in general) into that scapegoat and giving people the target to blame all their woes on. What shocks me is that the majority seems to actually believe it, when it's government greed, corruption and incompetence that has driven this country into it's current morass.
Have we all forgotten the old warning, "I'm from the government and I'm here to help." Wake up people!
Would be nice if Everyman had all the information necessary to make good purchase and investment decisions. Heck whole nations like Iceland were taken in by the sub prime mortgage rip off. So the holders of these bundled securities lost out, and the homeowners who relied on deals that was too good to be true are being rolled up by the very banks that defrauded them. This OP and its replies go round and round and the devastation still exists. It was a BIG fraud on the public by institutions who were very aware of the risks, but still sold to the public mortgage securities, and did not disclosed those risks because they was raking it in. And they were pretty sure that the law couldn't touch them. So the con worked.
I asked you if you noticed the bigger banks have a lower cost-of-capital than the smaller banks and you said "Yes." Do you remember this ? Just scroll up. You may need to navigate to the previous page in the forum thread.
we were talking about firms with large amounts of cash and bond assets, if you recall. A company like google with $50 billion in cash doesn't need to borrow money to finance its operations.
and no, whether it needs to and whether it is advantageous to do so are not the same thing.
This really couldn't be farther from the truth. Having absolutely no debt is almost always a stupid decision. Do you research anything before posting? Google had $4.2 billion in debt on their balance sheet in 2011. Depending on lending practices and current rates, using cash instead of debt for business operations can be an incredibly stupid thing to do.
This really couldn't be farther from the truth. Having absolutely no debt is almost always a stupid decision. Do you research anything before posting? Google had $4.2 billion in debt on their balance sheet in 2011. Depending on lending practices and current rates, using cash instead of debt for business operations can be an incredibly stupid thing to do.
Thank you. I have been having a hard time communicating that to this poster, but your Google debt # illustrates the point. It can be stupid/irresponsible/bad business to use cash instead of bank credit (which often comes from Big Banks). How effectively could a company compete if it stopped using debt for operations? If a company does not take the "advantageous" financing route, they are likely out of business.
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Bank charges and fees
