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Old 09-24-2011, 12:44 PM
 
Location: Seattle
1,369 posts, read 3,049,155 times
Reputation: 1496

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Quote:
Originally Posted by gwynedd1 View Post
Hi drshang,

No doubt the lending was all about bank accounting rules, but isn't it time we discard this hybrid medieval banking system? How can blips on a computer go missing? That is why all the people talking about a hyper inflationary avalanche fundamentally had no idea what and why this was happening. The insolvency was due in large part to a banking system engineered feedback loop that depressed the value of their assets which then tripped the rules on capital requirements. Why is such a system with such obvious flaws a god to worship? Why do we need to temporarily infuse assets into banks to satisfy a book entry? Its a model-T without a seat belt with real time rocket boosters attached. We should not have whiplash ponzi schemes behind our money supply.
Banks have been given more leeway on mark-to-market accounting rules in the last few years. Certainly there would be many immediately insolvent European banks if mark-to-market was used and all loans on their balance sheets were forced to be written down to current market values. While to a certain degree by not forcing mark-to-market you are "engineering" an insolvent entity to appear solvent, if you don't you have several large insolvent financial institutions, which will likely create a near globalized run on the banks.

In my view what is necessary is a TARP like fund in Europe set up by the G20 (yes, countries like the US/Japan/China will probably play a role in helping to bail out European banks), with a massive backstop to prevent any run on the banks. Following this, GLOBAL, consistent capital requirements should be required to prevent future global banking collapses (we already essentially had one, let's not have a second). I have read things that have argued for a "bailout insurance fund" to fund future banking collapses. I think this might be overdoing it but think of something similar to FDIC for global banking.

Look, banks are going to hate it, they are going to *****, moan, whine, whimper and complain. The reality is, we have a global banking system that is incredibly interconnected and I don't see that changing, and if it does, it will become even more integrated than it is already. In my view, banks should be held fully responsible for the risky bets they made.

They are too aggressive, employees are incentivised to take massive risks with capital (think like the current UBS $2B trading scandal, there is also a banking scandal in South Korea), and with financial engineering they have lots of ways to hide risky bets away from 10K, 10Q and other investor disclosures. Personally I think global regulations are the way to go, but lots of people disagree.
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Old 09-25-2011, 02:03 PM
 
Location: San Diego California
6,797 posts, read 6,626,572 times
Reputation: 5180
Quote:
Originally Posted by user_id View Post
The discount window is the only way for banks to borrow directly from the fed. During the crisis there were some other mechanism used by the fed as well, but they didn't involve direct borrowing instead the purchasing of assets. The banks certainly benefited from fed action during the crisis, that was after all the point, but suggesting that the banks aren't lending right now because they can borrow from the fed for 0% and then get paid interest from the fed on these some funds is fundamentally wrong. Not to mention...that banks are lending right now just at reduced levels.

The article you posted doesn't cite a single detail...the fed doesn't pay banks interest except in the case of reverses....but that rate is .25%.
Confirmed: Federal Reserve Policy is Killing Lending, Employment and the Economy → Washingtons Blog
Bachus Asks Whether Fed's Policy is Discouraging Banks From Lending | House Committee on Financial Services
http://www.google.com/url?sa=t&sourc...DwxKIBtPjQMdCw
The Fed Doesn't Really Want Banks to Increase Lending - Seeking Alpha

These articles all say Fed policy is discouraging lending. Or should we say covering for the financial industry.


By the way, I like the way you use the Euphemism ... "purchasing of assets".

I would sure like to make a deal like that. First take your bad investments, bad loans, etc. Then sell them (asset swap) to the Fed at 100% of their face value, and then loan that money back to the Fed at a profit. Sweet!

Do you think we could get the Fed to work that deal for the general public?
Nah, didn't think so. After all, they don't work for us.

But thanks for helping enlighten people to the governments activities.
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Old 09-25-2011, 03:01 PM
 
Location: Conejo Valley, CA
12,470 posts, read 18,192,512 times
Reputation: 4343
Quote:
Originally Posted by jimhcom View Post
These articles all say Fed policy is discouraging lending. Or should we say covering for the financial industry.
So what? You can also find hundreds of articles about alien abduction.

You keep repeating yourself and you never justify or even give details about your claims. Except for paying .25% on excess reserves, how is the fed paying interest to banks? Outside of the discount window how are the banks borrowing from the fed? Give details.

Quote:
Originally Posted by jimhcom View Post
By the way, I like the way you use the Euphemism ... "purchasing of assets".
Umm...its not an euphemism...they indeed purchased assets. Many of the assets purchased ended up being worth more than they purchased them for, others less. Overall little money was lost here, the fed just became the buyer of last result in a time when the markets were frozen.
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Old 09-27-2011, 11:16 AM
 
Location: Embarrassing, WA
2,287 posts, read 1,604,941 times
Reputation: 2635
Quote:
Originally Posted by jimhcom View Post
Don't count on higher interest rates in the foreseeable future. If you want a blueprint of where we are going study where Japan was at this point in there multi decade recession.
The current economic situation is benefiting the banks and large corporations at the expense of the working people, and since the government and the Fed work for the banks and corporations, the status quo will continue.
As far as the economy picking up... don't hold your breath waiting for that either. There is no reason for the economy to pick up as the economic base of the country has been undermined by trade agreements designed to allow corporations to offshore production while still exploiting domestic consumption.
The current economic situation is one of continued devaluation of real estate and equities, higher unemployment, lower wages, and more inflation on day to day necessities. Not exactly a recipe for economic recovery.
Ding ding ding...we have a winner. The few ultra elite running the show and "puppeting" gov't, the rest of us living in poverty. That is the plan.
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Old 09-27-2011, 12:32 PM
 
2,515 posts, read 1,819,085 times
Reputation: 362
Quote:
Originally Posted by cdelena View Post
It seems to me that all modern monetary policy is manipulation based upon theories and models usually resulting in negative unintended consequences.

A simple formula to insure there is sufficient currency to cover economic activity should be adequate to let a free market set rates... I would prefer a less active fed.
Wouldn't we all but we have a popping real estate bubble to deal with and that is a problem after we get a good solid economic recovery then we should have stable fed policies that don't blow bubbles.
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Old 09-27-2011, 01:22 PM
 
Location: Embarrassing, WA
2,287 posts, read 1,604,941 times
Reputation: 2635
Quote:
Originally Posted by newonecoming2 View Post
Wouldn't we all but we have a popping real estate bubble to deal with and that is a problem after we get a good solid economic recovery then we should have stable fed policies that don't blow bubbles.
This is the root of alot of the problems. The pay is declining but many people are still stuck with the payment on a "bubble priced" home and can't make ends meet with the income opportunites available. It's obvious with the new global market that no one will touch(gov't won't enact tariffs), that this viscous circle of decline will continue to errode the real estate market.
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Old 09-28-2011, 08:42 AM
 
2,515 posts, read 1,819,085 times
Reputation: 362
Quote:
Originally Posted by rkcarguy View Post
This is the root of alot of the problems. The pay is declining but many people are still stuck with the payment on a "bubble priced" home and can't make ends meet with the income opportunites available. It's obvious with the new global market that no one will touch(gov't won't enact tariffs), that this viscous circle of decline will continue to errode the real estate market.
I've talked about doing a 4x on the minimum wage, that and having an enforced savings plan, with a high enough savings rate we should get balanced trade even without protective tariffs. The fed is trying to push more debt what we really need is cash for consumers, $3k per person extra should get the economy jumping.

And we need to expand the tax base, tax the principle on debt.
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Old 09-28-2011, 08:55 AM
 
Location: Heartland Florida
9,324 posts, read 24,694,936 times
Reputation: 4969
I still do not understand why the Congress cannot just issue all the debt-free money it needs to pay off the Fed and get them out of the picture? Give them a bunch of (worthless) US notes to replace the debt loaded worthless federal reserve notes. Or better yet, just audit the Fed and see where all this "money" they create comes from?
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Old 09-28-2011, 09:06 AM
 
2,515 posts, read 1,819,085 times
Reputation: 362
Quote:
Originally Posted by tallrick View Post
I still do not understand why the Congress cannot just issue all the debt-free money it needs to pay off the Fed and get them out of the picture? Give them a bunch of (worthless) US notes to replace the debt loaded worthless federal reserve notes. Or better yet, just audit the Fed and see where all this "money" they create comes from?
We could be minting a bunch of coins and using the money to get the economy going.
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