Stiggy's analysis
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Not saying what the Govts are doing is the best way out, but letting the banks fail is going to hurt many more than just their shareholders and employees. People will see their savings wiped out. There will be serious contractions in credit (there already are, in fact, but I'm talking about much worse). Pretty much all other industries will start going down because their credit lines will freeze up.
Cheers, Vıkram.
Carpe Diem.
Vikram A Punathambekar wrote:
People will see their savings wiped out.
Peoples savings are protected by the FDIC (up to $250,000 per account, double that if a joint account). AFAIK no one has lost money in a bank failure since the 1930's unless they foolishly had more than the insured amount on deposit in a single account, and even then only the uninsured excess. As you pointed out, credit is frozen now, even though trillions have been poured in to the banks, mostly because of the bad assets held by the banks, so it would appear that merely dumping capital into the banks is not helping.
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Oakman wrote:
After the treatment of the head of AIG, and the newly-demonstrated propensity of Congress to pass bills of attainder, when it came time to shop the job of head of GM around - no-one wanted it
Are you implying a correlation?
led mike wrote:
Are you implying a correlation?
To tell the truth, I thought I was doing more than implying. I do not necessarily claim that I've cited the only reason Obama couldn't find folks eager to take on a 60 day rescue of the ailing giant, but I feel sure it was a major factor in the decisions.
Jon Smith & Wesson: The original point and click interface
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Not saying what the Govts are doing is the best way out, but letting the banks fail is going to hurt many more than just their shareholders and employees. People will see their savings wiped out. There will be serious contractions in credit (there already are, in fact, but I'm talking about much worse). Pretty much all other industries will start going down because their credit lines will freeze up.
Cheers, Vıkram.
Carpe Diem.
Vikram A Punathambekar wrote:
People will see their savings wiped out.
I take it there is no deposit insurance in India? It probably demonstrates how used to that I've become when it took me a second to realise that must be the case. People who gamble either on the stock market, a roulette wheel, or by buying houses because they believe their value will go up, should not expect the rest of us to bail them out.
Jon Smith & Wesson: The original point and click interface
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Not saying what the Govts are doing is the best way out, but letting the banks fail is going to hurt many more than just their shareholders and employees. People will see their savings wiped out. There will be serious contractions in credit (there already are, in fact, but I'm talking about much worse). Pretty much all other industries will start going down because their credit lines will freeze up.
Cheers, Vıkram.
Carpe Diem.
But people are already seeing this. Not to the degree you suggesting I think, but along FAT's line, the recovery process would be quicker, right now it looks like it'll draw out for a couple of decades and we still might see the scenario you're worried about. But here's an idea. Most of the bad money is a bet on a default. So why not protect the default instead of covering the bad bet? We're talking about a couple hundred thousand instead of a few million per loan.
This statement is false
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Vikram A Punathambekar wrote:
People will see their savings wiped out.
Peoples savings are protected by the FDIC (up to $250,000 per account, double that if a joint account). AFAIK no one has lost money in a bank failure since the 1930's unless they foolishly had more than the insured amount on deposit in a single account, and even then only the uninsured excess. As you pointed out, credit is frozen now, even though trillions have been poured in to the banks, mostly because of the bad assets held by the banks, so it would appear that merely dumping capital into the banks is not helping.
Rob Graham wrote:
As you pointed out, credit is frozen now, even though trillions have been poured in to the banks, mostly because of the bad assets held by the banks, so it would appear that merely dumping capital into the banks is not helping.
I must be really stupid. There's something I am not getting. Are banks really not lending money they have because they also have assets that they have overvalued? It is my impression that they are not lending money because they don't think they're going to get paid back. If I'm right, the banks will gladly sell their bad assets to the hedgefunds that have climbed in bed with the government, but until and unless they start to believe that their customers are credit-worthy, they won't suddenly start lending money to everyone who thinks they might like a new car, house, boat, or porch. Now, if people start depositing real savings into the banks, that will increase the supply of money and might drive the intrest rates down a bit, but so long as the assumption is that many of their customers may lose their livelihoods long before the end if the loan, they'll still only want to deal with people who have very high credit scores. And, if I am an investor in the bank either directly or thanks to the intervention of the Administration, I don't want them to lend to people who aren't going to pay it back, Do I? :confused:
Jon Smith & Wesson: The original point and click interface
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Rob Graham wrote:
As you pointed out, credit is frozen now, even though trillions have been poured in to the banks, mostly because of the bad assets held by the banks, so it would appear that merely dumping capital into the banks is not helping.
I must be really stupid. There's something I am not getting. Are banks really not lending money they have because they also have assets that they have overvalued? It is my impression that they are not lending money because they don't think they're going to get paid back. If I'm right, the banks will gladly sell their bad assets to the hedgefunds that have climbed in bed with the government, but until and unless they start to believe that their customers are credit-worthy, they won't suddenly start lending money to everyone who thinks they might like a new car, house, boat, or porch. Now, if people start depositing real savings into the banks, that will increase the supply of money and might drive the intrest rates down a bit, but so long as the assumption is that many of their customers may lose their livelihoods long before the end if the loan, they'll still only want to deal with people who have very high credit scores. And, if I am an investor in the bank either directly or thanks to the intervention of the Administration, I don't want them to lend to people who aren't going to pay it back, Do I? :confused:
Jon Smith & Wesson: The original point and click interface
Oakman wrote:
There's something I am not getting. Are banks really not lending money they have because they also have assets that they have overvalued? It is my impression that they are not lending money because they don't think they're going to get paid back.
I have the same impression. They seem to be willing to lend to good credit risks who have assets to back up the loans.
Sovereign ingredient for a happy marriage: Pay cash or do without. Interest charges not only eat up a household budget; awareness of debt eats up domestic felicity. --Lazarus Long Avoid the crowd. Do your own thinking independently. Be the chess player, not the chess piece. --?
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Oakman wrote:
There's something I am not getting. Are banks really not lending money they have because they also have assets that they have overvalued? It is my impression that they are not lending money because they don't think they're going to get paid back.
I have the same impression. They seem to be willing to lend to good credit risks who have assets to back up the loans.
Sovereign ingredient for a happy marriage: Pay cash or do without. Interest charges not only eat up a household budget; awareness of debt eats up domestic felicity. --Lazarus Long Avoid the crowd. Do your own thinking independently. Be the chess player, not the chess piece. --?
Chris Austin wrote:
I have the same impression. They seem to be willing to lend to good credit risks who have assets to back up the loans.
And is there something in Obma's plan - or in nationalization - that will create more creditworthiness among their customers? Even if they sucker Uncle Sugar into buying up all the toxic assets, why would they immediately forget how and why they got into this fix and start repeating the same stupid behavior that cause their problems in the first place? I certainly believe that Barney Frank is dumb enough to want to repeat all the mistakes of the last couple of decades, but I am not sure that Ken Lewis is.
Jon Smith & Wesson: The original point and click interface
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Stan Shannon wrote:
So the real answer is to just turn over all economic authority to the central state to be managed by bureaucrats who have absolutely no business knowledge of any kind
Government appointed administrators can easily be --- and almost certainly would be --- people with a business background. The notion that there is a class of people called bureaucrats and a class of people called business people, with no overlap, is just silly.
Stan Shannon wrote:
amazing how conveniently that all worked out for the left.
So far it hasn't worked out at all. Obama, the great redistributionist, is thus far mainly redistributing to wealthy investors.
John Carson
John Carson wrote:
Government appointed administrators can easily be --- and almost certainly would be --- people with a business background.
Perhaps you could name a few...
John Carson wrote:
Obama, the great redistributionist, is thus far mainly redistributing to wealthy investors.
Not really.
Chaining ourselves to the moral high ground does not make us good guys. Aside from making us easy targets, it merely makes us idiotic prisoners of our own self loathing.
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Chris Austin wrote:
I have the same impression. They seem to be willing to lend to good credit risks who have assets to back up the loans.
And is there something in Obma's plan - or in nationalization - that will create more creditworthiness among their customers? Even if they sucker Uncle Sugar into buying up all the toxic assets, why would they immediately forget how and why they got into this fix and start repeating the same stupid behavior that cause their problems in the first place? I certainly believe that Barney Frank is dumb enough to want to repeat all the mistakes of the last couple of decades, but I am not sure that Ken Lewis is.
Jon Smith & Wesson: The original point and click interface
Oakman wrote:
Even if they sucker Uncle Sugar into buying up all the toxic assets, why would they immediately forget how and why they got into this fix and start repeating the same stupid behavior that cause their problems in the first place?
I hope not. But, there was that little savings and loan fiasco just about 2 decades ago. Not really the same thing but, I think more of a symptom of our flaws in our systems.
Oakman wrote:
And is there something in Obma's plan - or in nationalization - that will create more creditworthiness among their customers?
I have no idea. I have a very rough idea that a real percentage of people who were deemed unworthy of credit prior to this credit bubble inflating were they type of people who would always be poor credit bets. I don't think we should be expecting the banks to lend to them in the near future. I am just hoping that we return to a situation based or reality rather than wishful thinking.
Oakman wrote:
I certainly believe that Barney Frank is dumb enough to want to repeat all the mistakes of the last couple of decades, but I am not sure that Ken Lewis is.
Hopefully we can move to more long term planning. When the whole country is only planning the next two or four quarters we are bound to see this repeat itself in some way.
Sovereign ingredient for a happy marriage: Pay cash or do without. Interest charges not only eat up a household budget; awareness of debt eats up domestic felicity. --Lazarus Long Avoid the crowd. Do your own thinking independently. Be the chess player, not the chess piece. --?
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John Carson wrote:
Government appointed administrators can easily be --- and almost certainly would be --- people with a business background.
Perhaps you could name a few...
John Carson wrote:
Obama, the great redistributionist, is thus far mainly redistributing to wealthy investors.
Not really.
Chaining ourselves to the moral high ground does not make us good guys. Aside from making us easy targets, it merely makes us idiotic prisoners of our own self loathing.
Stan Shannon wrote:
Not really.
You mean as in, Iraq "Mission Accomplished".... Not really. Or maybe what you mean is when an out of work 40 year old welder with an out of work nurse for a wife and 3 kids gets money from taxpayers, that's welfare and redistributing the wealth, but when private unregulated companies that have wealthy stockholders receive taxpayers money, that's stimulating the economy? You mean that sort of Not really? :rolleyes:
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Rob Graham wrote:
As you pointed out, credit is frozen now, even though trillions have been poured in to the banks, mostly because of the bad assets held by the banks, so it would appear that merely dumping capital into the banks is not helping.
I must be really stupid. There's something I am not getting. Are banks really not lending money they have because they also have assets that they have overvalued? It is my impression that they are not lending money because they don't think they're going to get paid back. If I'm right, the banks will gladly sell their bad assets to the hedgefunds that have climbed in bed with the government, but until and unless they start to believe that their customers are credit-worthy, they won't suddenly start lending money to everyone who thinks they might like a new car, house, boat, or porch. Now, if people start depositing real savings into the banks, that will increase the supply of money and might drive the intrest rates down a bit, but so long as the assumption is that many of their customers may lose their livelihoods long before the end if the loan, they'll still only want to deal with people who have very high credit scores. And, if I am an investor in the bank either directly or thanks to the intervention of the Administration, I don't want them to lend to people who aren't going to pay it back, Do I? :confused:
Jon Smith & Wesson: The original point and click interface
The big banks, recipents of most of the bailout funds, are using it to pay off their own debt, or holding it as insurance against massive write downs of their crapassets[^]. Smaller banks are lending again, but only to very credit wiorthy customers - erring now on the safe side instead of accepting their normal risk levels. Consumers with average credit can't get new car loans or mortgages because the banks now have an inordinate fear of default. We might well be better off if the Fed did with them (Citi, BofA, Wells) as they did with WAMU. Put them in receivership, let the debt holders eat the bad crap, and start the banks back up on a solid footing. The wealth represented by the CDS's and similar junk derivatives is never going to come back (it was fiction to begin with). Scrub the books and start em over, protecting depositors. Stop socializing the losses on bad risk across the whole bloody tax base and stop rewarding those who took dumb risks.
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Stan Shannon wrote:
Not really.
You mean as in, Iraq "Mission Accomplished".... Not really. Or maybe what you mean is when an out of work 40 year old welder with an out of work nurse for a wife and 3 kids gets money from taxpayers, that's welfare and redistributing the wealth, but when private unregulated companies that have wealthy stockholders receive taxpayers money, that's stimulating the economy? You mean that sort of Not really? :rolleyes:
led mike wrote:
Or maybe what you mean is when an out of work 40 year old welder with an out of work nurse for a wife and 3 kids gets money from taxpayers, that's welfare and redistributing the wealth, but when private unregulated companies that have wealthy stockholders receive taxpayers money, that's stimulating the economy? You mean that sort of Not really?
I mean 'not really' because he is going to be taking the money right back from the rich in taxes, or by simply setting their wages to what he thinks they should make. But, yeah, aside from that, he wants the corporate world cooperating with the government - that is how facism works, after all. Oh, and BTW, the USS Abraham Lincoln's mission was accomplished. Thats why they put the banner up. US Naval vessels do that all the time.
Chaining ourselves to the moral high ground does not make us good guys. Aside from making us easy targets, it merely makes us idiotic prisoners of our own self loathing.
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The big banks, recipents of most of the bailout funds, are using it to pay off their own debt, or holding it as insurance against massive write downs of their crapassets[^]. Smaller banks are lending again, but only to very credit wiorthy customers - erring now on the safe side instead of accepting their normal risk levels. Consumers with average credit can't get new car loans or mortgages because the banks now have an inordinate fear of default. We might well be better off if the Fed did with them (Citi, BofA, Wells) as they did with WAMU. Put them in receivership, let the debt holders eat the bad crap, and start the banks back up on a solid footing. The wealth represented by the CDS's and similar junk derivatives is never going to come back (it was fiction to begin with). Scrub the books and start em over, protecting depositors. Stop socializing the losses on bad risk across the whole bloody tax base and stop rewarding those who took dumb risks.
Rob Graham wrote:
Consumers with average credit can't get new car loans or mortgages because the banks now have an inordinate fear of default.
Rob, what is the definition of "average credit?" Does the increasing number of Americans who are losing their jobs each month (750 million in March) affect the minium credit rating necessary to get a car? This is anecdotal, but my friend who runs a Honda dealership said that last Saturday she had 50 potential buyers. She closed the deal with half of them and the other half either were so upside down on their present car loan or had what she called "crap credit" as to have wasted her salesmen's time and their own. I'll ask her, next time we talk what she meant by "crap credit."
Jon Smith & Wesson: The original point and click interface
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led mike wrote:
Or maybe what you mean is when an out of work 40 year old welder with an out of work nurse for a wife and 3 kids gets money from taxpayers, that's welfare and redistributing the wealth, but when private unregulated companies that have wealthy stockholders receive taxpayers money, that's stimulating the economy? You mean that sort of Not really?
I mean 'not really' because he is going to be taking the money right back from the rich in taxes, or by simply setting their wages to what he thinks they should make. But, yeah, aside from that, he wants the corporate world cooperating with the government - that is how facism works, after all. Oh, and BTW, the USS Abraham Lincoln's mission was accomplished. Thats why they put the banner up. US Naval vessels do that all the time.
Chaining ourselves to the moral high ground does not make us good guys. Aside from making us easy targets, it merely makes us idiotic prisoners of our own self loathing.
Stan Shannon wrote:
that is how facism works, after all.
How come when I suggested it was fascism, you told me it was socialism, but now that Glen Beck is saying it's fascism, you agree?
Stan Shannon wrote:
Thats why they put the banner up. US Naval vessels do that all the time.
But Presidents don't always put on flight suits and zoom out to stand in front of those banners, do they?
Jon Smith & Wesson: The original point and click interface
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Rob Graham wrote:
Consumers with average credit can't get new car loans or mortgages because the banks now have an inordinate fear of default.
Rob, what is the definition of "average credit?" Does the increasing number of Americans who are losing their jobs each month (750 million in March) affect the minium credit rating necessary to get a car? This is anecdotal, but my friend who runs a Honda dealership said that last Saturday she had 50 potential buyers. She closed the deal with half of them and the other half either were so upside down on their present car loan or had what she called "crap credit" as to have wasted her salesmen's time and their own. I'll ask her, next time we talk what she meant by "crap credit."
Jon Smith & Wesson: The original point and click interface
Oakman wrote:
Rob, what is the definition of "average credit?"
Tell ya the truth, Jon, I don't know. I assume it's a mediocre credit score, which usually means the person isn't too over leveraged, but doesn't always pay on time. "crap credit" is probably a combination of lousy payment history and too much outstanding credit for their income. Your anecdotal story means little to me, since it says nothing about how that compares to say two years ago. I'd bet the distributions is about the same, but the totals are at least 50% lower.
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Stan Shannon wrote:
that is how facism works, after all.
How come when I suggested it was fascism, you told me it was socialism, but now that Glen Beck is saying it's fascism, you agree?
Stan Shannon wrote:
Thats why they put the banner up. US Naval vessels do that all the time.
But Presidents don't always put on flight suits and zoom out to stand in front of those banners, do they?
Jon Smith & Wesson: The original point and click interface
Oakman wrote:
How come when I suggested it was fascism, you told me it was socialism, but now that Glen Beck is saying it's fascism, you agree?
I don't recall the conversation, but I've been calling this fascism for years now. Glen Beck, et al, are just catching up. But since fascism is just national (versus international) socialism, either description would be correct.
Oakman wrote:
But Presidents don't always put on flight suits and zoom out to stand in front of those banners, do they?
Not usually, no. Bad PR move on the president's part, I agree. But there is no doubt that the ship and her crew certainly accomplished their mission.
Chaining ourselves to the moral high ground does not make us good guys. Aside from making us easy targets, it merely makes us idiotic prisoners of our own self loathing.
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Oakman wrote:
Rob, what is the definition of "average credit?"
Tell ya the truth, Jon, I don't know. I assume it's a mediocre credit score, which usually means the person isn't too over leveraged, but doesn't always pay on time. "crap credit" is probably a combination of lousy payment history and too much outstanding credit for their income. Your anecdotal story means little to me, since it says nothing about how that compares to say two years ago. I'd bet the distributions is about the same, but the totals are at least 50% lower.
Rob Graham wrote:
I'd bet the distributions is about the same, but the totals are at least 50% lower.
I don't know about the first - I'll ask, but I know you are close on the second - she's doing about 60% of the business she was - and that's the best of any dealership in her city.
Jon Smith & Wesson: The original point and click interface
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Rob Graham wrote:
Consumers with average credit can't get new car loans or mortgages because the banks now have an inordinate fear of default.
Rob, what is the definition of "average credit?" Does the increasing number of Americans who are losing their jobs each month (750 million in March) affect the minium credit rating necessary to get a car? This is anecdotal, but my friend who runs a Honda dealership said that last Saturday she had 50 potential buyers. She closed the deal with half of them and the other half either were so upside down on their present car loan or had what she called "crap credit" as to have wasted her salesmen's time and their own. I'll ask her, next time we talk what she meant by "crap credit."
Jon Smith & Wesson: The original point and click interface
Oakman wrote:
Rob, what is the definition of "average credit?"
My opinion is anything below 600. I move the houses I own via seller financing since Fannie and Freddie have dried up for people who really need them. If someone comes to me with anything below 600 I just will not do it. I only do about 4 of these a year so I am no real expert but I have my own threshold. [Edit] I am talking about what is know as the mid score. Basically, and average of all three credit reporting agencies.
Sovereign ingredient for a happy marriage: Pay cash or do without. Interest charges not only eat up a household budget; awareness of debt eats up domestic felicity. --Lazarus Long Avoid the crowd. Do your own thinking independently. Be the chess player, not the chess piece. --?
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led mike wrote:
Or maybe what you mean is when an out of work 40 year old welder with an out of work nurse for a wife and 3 kids gets money from taxpayers, that's welfare and redistributing the wealth, but when private unregulated companies that have wealthy stockholders receive taxpayers money, that's stimulating the economy? You mean that sort of Not really?
I mean 'not really' because he is going to be taking the money right back from the rich in taxes, or by simply setting their wages to what he thinks they should make. But, yeah, aside from that, he wants the corporate world cooperating with the government - that is how facism works, after all. Oh, and BTW, the USS Abraham Lincoln's mission was accomplished. Thats why they put the banner up. US Naval vessels do that all the time.
Chaining ourselves to the moral high ground does not make us good guys. Aside from making us easy targets, it merely makes us idiotic prisoners of our own self loathing.
Stan Shannon wrote:
I mean 'not really' because he is going to be taking the money right back from the rich in taxes
How does that address the point? We have always taken taxes, the point is about who we are now paying them to, or did I miss something?
Stan Shannon wrote:
he wants the corporate world cooperating with the government - that is how facism works, after all.
So if he "wants" it then that's not what already exists. Therefore the opposite of what he "wants" is how "it worked" to arrive at this situation to start with, which is, not so wonderfully well in case you aren't paying attention. Just like we did Iraq the way Bush "wants" and it's not going so well, in case you aren't paying attention. So this just sounds like another Stan conversation where we talk about all of Stan's theories and opinions while ignoring reality, or am I missing something?
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Not saying what the Govts are doing is the best way out, but letting the banks fail is going to hurt many more than just their shareholders and employees. People will see their savings wiped out. There will be serious contractions in credit (there already are, in fact, but I'm talking about much worse). Pretty much all other industries will start going down because their credit lines will freeze up.
Cheers, Vıkram.
Carpe Diem.
Vikram A Punathambekar wrote:
but letting the banks fail is going to hurt many more than just their shareholders and employees.
Not all banks are affected. Not all banks took part in the crazy selling and buying of debt. In the UK HBOS and NorthernRock were the two worst ones. Other banks, notably HSBC, a massive international group, has been almost unaffected because their management knew these credit products were bad and didnt buy into them. Let the few bad banks fold. If those savers loose their cash then so what? OK, its tough, perhaps the govt would do beter to pay them directly, but to fund a business that has been incompetently managed by taxpayers money?
Morality is indistinguishable from social proscription