Banking on the Brink »
Posted By Beau7890 9 months ago in Business & FinanceComrade Greenspan wants us to seize the economy’s commanding heights.
O.K., not exactly. What Alan Greenspan, the former Federal Reserve chairman — and a staunch defender of free markets — actually said was, “It may be necessary to temporarily nationalize some banks in order to facilitate a swift and orderly restructuring.” I agree.
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Beau7890
Truth rests on the mathematical reeds of the infinite and everything moves forward by order of the eagle riding pillion, while the genius of vegetable ...
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Beau78909 months ago
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I know--many will scream "Communism! Socialism!"
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Whatever. The nationalization solution--excuse me, receivership--is temporary. And even Lindsey Graham has said he thinks it should be on the table.
At what point does the government step in and force banks to do what's right for their businesses and for the American taxpayer? Continuing to shovel tax dollars at the banks in the hope that they'll correct their mistakes isn't working--at this point, the banks want far more than their companies are worth. As the article says:
the funds needed to bring these banks fully back to life would greatly exceed what they’re currently worth. Citi and BofA have a combined market value of less than $30 billion, and even that value is mainly if not entirely based on the hope that stockholders will get a piece of a government handout. And if it’s basically putting up all the money, the government should get ownership in return. -
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beavith19 months ago
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unbelievable. Krugman, the genius, opines that banks are zombies, but, rather than address WHY they are zombies (and fix that!) he still champions bailouts.
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he sees the problem but tries to fix something else.
what is it going to freaking TAKE to get him to see what's going on? i mean, he's the democratic poster boy for 'flank speed' and because he's got a Nobel from work done 30 years ago, people ACTUALLY LISTEN TO HIM!
groan...-
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Beau78909 months ago
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Here's an article from October of last year that addresses why the banks have not benefited so far. And it correctly predicts what we saw resulting from TARP:
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http://www.nytimes.com/2008/10/27/opinion/27krugma...
What’s happening, I suspect, is that the Bush administration’s anti-government ideology still stands in the way of effective action. Events have forced Mr. Paulson into a partial nationalization of the financial system — but he refuses to use the power that comes with ownership.
No, that one doesn't address why banks are failing--it addresses why they're still failing.
But it also underscores what Krugman's been saying for years--that deregulation and lack of oversight of banks and enforcement of regulation has caused the mess the banks are now in. (That, and over-reliance on the Fed to control rates.) -
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4cprocess9 months ago
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Just a hint for our "promised one" since the topic here seems to be how to decrease the bank's "toxic" assets with a takeover from the federal level.
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Think of America as a store and you (the American taxpayer or "owner" of the store) are "overstocked" on homes or we'll just call them cans of beans for the sake of argument.
What do you do?
You don't give "first-time" bean buyers an 8,000 dollar credit (the promised one's "Stimulus Package") to buy the "new" or "old" beans on the shelf but you give them 15,000 dollars to buy the "old" ones, you know, the "existing" beans and 5,000 dollars credit to buy the "new" ones. You also offer this credit to "all" the buyers not just the "new buyers or for the sake of another argument, newbies or in other words the inexperienced buyers" and you lower the credit on the "new" beans so they'll clear your inventory of the "old" beans (at such a "great deal") so once the inventory of the "old" beans have been sold you can "restock" with new beans while at the same time making the "old" beans still more attractive. This will reduce the unnecessary production of "new" beans for nothing other than the false belief that the "new" beans are better and replace that with a "true" demand for the "new" ones simply because the "old" ones are all GONE.
Still with me?
The "old" beans are the toxic assets that we as a nation will inherit once we federalize the banks.
We know the "old" beans as the "existing" beans. A bean cannot be foreclosed on if it doesn't exist, right? So we're not so blind as to know these "old" beans don't exist (even though most of us "want" the "new"' ones) and always will no matter how we feel, it's just something about buying something "new". It's bred in us from birth through our societal evolution.
Once the "old" toxic beans are cleared from the balance sheet, then restocking can begin. Pretty soon your stock of beans will always be fresh because those who seek a "deal", which we all are guilty of, will always "react to" and ensure the "freshest" beans available because of the "incentive" (in other words "the carrot") that will be "presented" "by some stimulus effect", to ensure no "beans", "old" or "new" will go to waste by "any" of us.
Simple economics! Wha-la! Capitalism pure and simple.
Thus creating the need for someone or "anyone", or maybe even "all of us", to start making more beans.
In God We Trust
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Progressive9 months ago
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Some would say the banks are already nationalized:
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http://www.thedailybeast.com/blogs-and-stories/200...-
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Progressive9 months ago
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...but here's the latest update:
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http://www.reuters.com/article/marketsNews/idUSN23...
"The U.S. government stands firmly behind the banking system during this period of financial strain to ensure it will be able to perform its key function of providing credit to households and businesses," the regulators said in a statement issued by the U.S. Treasury. For full text of statement, see [ID:nWEQ000701]
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nostalgia9 months ago
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Sure let's dump more money into Citi. We already gave them more than what they are worth if sold
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Interesting article from the UK on this
British jobs to be supported by American taxpayer with U.S. government set to buy 40% of Citigroup
American taxpayers could soon own 40 per cent of what was once the country's most valuable bank.
Citigroup Inc is in talks that could see the U.S. government boost its ownership stake to 40 per cent, according to media reports.
The bank employs some 11,000 people in the UK.
http://www.dailymail.co.uk/news/worldnews/article-...-
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nostalgia9 months ago
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And Citi's new announcement in India
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Citibank India announces launch of Citibank Platinum Select Credit Card
The key differentiators of the Card are its best-in-class rewards program with superior earn rates, low interest rates, a service platform dedicated exclusively to its cardmembers and enhanced security and fraud covers.
http://economictimes.indiatimes.com/News-by-Indust...
Be certain to read the section:
The Citibank Platinum Select Card benefits include:
Preferential Privileges -
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Beau78909 months ago
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"Sure let's dump more money into Citi. We already gave them more than what they are worth if sold."
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Yes. We may as well have some control over what they do, since we've in effect bought them already.
I'm not sure what your point is about Citi's foray into India...
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flyonthewallzz9 months ago
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http://www2.fdic.gov/qbp/grtable.asp?rptdate=2008s...
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3,240 Less than $100 Million 38.65%
4,470 $100 Million to $1 Billion 53.32%
560 $1 Billion to $10 Billion 6.68%
114 Greater than $10 Billion 1.36%
8,384 total FDIC banks
What I do not get: is why not just deposit a few million in the smaller banks and let them lend the money out. This is supposed to be a free market system and shareholders are supposed to understand that high yields only come from high risk. It is kind of hard to get paid without depositing money in a bank these days.
I kind of see it as a reverse treasury note.-
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Beau78909 months ago
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Woldn't depositing money into the smaller banks be the same as giving them bailout money? In other words, those banks would have the same leeway to use that money as it sees fit, and not lend it out?
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Yes, in theory, the government would still have the money and could withdraw it. However, if those small banks were to get into trouble, the FDIC couldn't guarantee the government's deposits--or it could, but that'd be the same as if the government just gave them the money in the first place... -
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nostalgia9 months ago
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Gee Fly
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That would make sense wouldn't it?
They are trying to keep these failing banks afloat so investors don't lose everything - you have to wonder how many of the elite in DC hold huge numbers of shares in these banks
Well no one ever has had a guarantee that they won't fail in this country - until now
The taxpayers are never going to see the money back from these bailouts
When Citi and BofA have been run into the ground like they have it's time to let them fail
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